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The latest cnbc report highlights a growing possibility of additional Federal Reserve interest-rate hikes, although Richmond Federal Reserve President Thomas Barkin said any increases should happen at a gradual pace. His comments reflect the central bank’s continuing concern that inflation remains too high despite a labor market that is still close to historic strength.
Speaking Thursday during the Richmond Fed’s 2026 CFO Summit, Barkin said policymakers face a relatively clear challenge. Unemployment is near record lows, while inflation continues to run above the Federal Reserve’s comfort level. That combination, he argued, suggests interest rates may need to move higher.
CNBC Reveals Why Gradual Fed Hikes May Be Ahead
“Unemployment’s near record lows, and inflation is too high,” Barkin said in an interview with CNBC’s Steve Liesman. “That means the path is pretty straightforward. The question, of course, is pace.”
Barkin added that a measured approach makes sense because economic conditions remain uncertain and policymakers will receive more data over the coming months. A slower pace would give officials time to assess how previous rate increases are affecting household spending, business investment and employment.
“Gradual makes sense if you think there’s uncertainty in the world, and if you think that there’s information you’re going to get in the period,” he said.
Federal Reserve Rate Outlook Takes Center Stage
The Federal Open Market Committee recently kept its benchmark overnight borrowing rate in a range of 3.75% to 4%. The decision followed a quarter-point increase in September, when officials broadly indicated that another hike could be appropriate before the end of 2026.
Financial markets are already preparing for that possibility. According to the CME Group’s FedWatch tool, markets are pricing in a better-than-80% chance of a rate increase in December, followed by another potential move in 2027.
- The federal funds rate remains between 3.75% and 4%.
- Markets see strong odds of a December rate increase.
- Officials are waiting for additional economic information.
- Barkin is expected to become a voting member of the Federal Open Market Committee in 2027.
Barkin is not currently a voting member of the rate-setting committee, but he will join the voting group next year. His remarks could therefore offer an important preview of the policy debate that may shape the Federal Reserve’s next decisions.
Inflation Remains the Critical Economic Risk
Barkin described inflation as “the most important risk right now.” He said recent and future policy moves should help cool price pressures, especially if elevated borrowing costs begin to restrain consumer demand and business activity.
At the same time, Barkin suggested that interest rates may not be as restrictive as some observers believe. He said current policy appears close to a level that neither strongly encourages nor limits economic growth. However, continued strength in consumption could indicate that policy is still somewhat accommodative.
Consumer spending accounts for roughly two-thirds of the U.S. economy. If spending remains elevated, policymakers may conclude that additional restraint is needed to bring inflation back toward the Fed’s target.
Artificial Intelligence Adds a New Layer of Uncertainty
Barkin also pointed to artificial intelligence as a possible source of near-term price pressure. The rapid expansion of AI infrastructure is increasing demand for data centers, power, equipment and specialized services. Those demands could push costs higher before the technology eventually improves productivity and expands supply.
Over the longer term, Barkin said AI could help increase production and ease inflation. The transition, however, may create uneven effects across industries and add complexity to the Federal Reserve’s economic calculations.
Credit Risks Around Hyperscalers Under Review
In a related warning, Barkin said debt issuance tied to hyperscalers could be worth watching. Estimates suggest that more than $500 billion in debt may be issued this year to support major cloud computing and AI infrastructure projects.
He said it is difficult to question the credit quality of large hyperscalers because many generate substantial cash from their core operations. The bigger concern, he explained, may involve financial intermediaries that assume risks connected to the sector without making those exposures fully visible.
“You do wonder where in the intermediary sector is the biggest risk,” Barkin said.
For consumers, businesses and investors, the central message is clear: the Federal Reserve is not finished evaluating higher interest rates. Borrowing costs, stock valuations, bond yields and economic growth could all respond to the next wave of inflation data and policy signals.
Frequently Asked Questions About the CNBC Fed Report
Does Thomas Barkin expect more interest-rate hikes?
Yes. Barkin said he expects the Federal Reserve may need to raise interest rates further, although he did not specify the total number or exact timing of increases.
Why does Barkin favor gradual rate increases?
He believes a gradual approach gives policymakers time to respond to economic uncertainty and review new information before making additional decisions.
What is the current federal funds rate range?
The Federal Reserve’s benchmark overnight borrowing rate is currently maintained between 3.75% and 4%.
What is the main risk identified by Barkin?
Barkin called inflation the most important current risk. He also flagged possible credit concerns involving financial intermediaries connected to AI and hyperscaler debt.
