The Federal Reserve’s newest hike is barely a week old, and central bank officials are already making the case that it was the right call. In a trio of public comments, policymakers argued that inflation risks now dominate the outlook, that price pressures are no longer confined to a few hot categories, and that more increases may be on the table.
Richmond Fed President Thomas Barkin set the tone Tuesday in remarks prepared for the CFA Society Baltimore, saying U.S. economic conditions “are, if anything, firming,” with continued consumer spending and strength beyond the artificial intelligence boom keeping the Fed’s focus on inflation, Reuters reported.
“The risks to inflation outweigh the risks to maximum employment. That’s why we raised rates,” Barkin said, adding that the quarter-percentage-point increase “will help” restore inflation to the Fed’s 2 percent target, per Reuters. Asked whether more hikes will be needed, he was direct: “Will additional hikes be required, and how many? We’ll see.” Barkin is not a voting member of the rate-setting Federal Open Market Committee this year.
Barkin pushed back on a favorite comfort story: that inflation is really just a handful of tariff-exposed or energy-linked categories. “It is tempting to try to blame high inflation on a handful of categories with particularly high exposure to the Middle East conflict or to tariffs,” he said. But much of the Personal Consumption Expenditures Price Index is increasing at greater than a 3 percent annual rate, Reuters reported. His anecdotal evidence went beyond the data-center story: “The defense sector is hot. Manufacturing contacts are starting to sound more upbeat. Bankers tell us pipelines are healthy.”
Collins: “Somewhat more restrictive”
Boston Fed President Susan Collins echoed the message the same day, writing in a LinkedIn post that she supported the central bank’s decision to raise rates, Reuters reported.
“I now see an increased likelihood of future scenarios in which inflation remains notably above 2%,” Collins wrote. “With the labor market on a better footing, monetary policy can focus on a timely return to price stability, especially after five and a half years of too-high inflation,” she added. “A somewhat more restrictive federal funds rate will help ensure that inflation durably returns to target.” Collins, like Barkin, is not a voting member of the FOMC this year, per Reuters.
The statements arrive as policymakers adjust to a reality that has unsettled them all year: shocks that were supposed to be one-offs are not fading. The Fed last week raised its policy rate to the 3.75 to 4.00 percent range and, in a subtle but important edit, dropped a reference in its policy statement that had attributed recent inflation “in part” to supply shocks, saying only that “inflation remains elevated,” Reuters reported.
That edit reflects growing skepticism at the central bank that tariffs and oil price increases were temporary. “Their influence has proved more persistent than expected,” Reuters noted in its Monday coverage, “with inflation now being driven by demand aspects as well.”
Musalem: rates still “on the accommodative side”
St. Louis Fed President Alberto Musalem sharpened the point a day earlier, saying he views the current 3.75 to 4.00 percent policy rate as “on the accommodative side,” meaning it is not yet high enough to restrict economic activity, and that more rate hikes are likely needed to quell inflation, Reuters reported.
His evidence: the PCE index, the Fed’s main inflation gauge, stood at 3.7 percent year over year in July, up from a recent low of 2.3 percent in April 2025, as the administration’s import tariffs took hold. Then came the U.S.-Israeli war with Iran, which pushed fuel costs up globally, with diesel recently hitting a record high. Through it all, domestic spending and growth have held firm, which Musalem called good news and an additional inflation challenge at the same time. “We have both strong demand forces and supply forces working themselves through the economy,” he said, per Reuters.
Policymakers have penciled in another rate increase before the year is out, though Chair Kevin Warsh has not publicly affirmed that projection, Reuters noted.
What to watch: investors are already anticipating more increases, and the calendar keeps coming. New York Fed President John Williams and Vice Chair Philip Jefferson are scheduled to speak Tuesday, with Williams, Barkin, Cleveland’s president, and Philadelphia’s president all set for Thursday. Every one of them will be asked some version of the question Barkin posed to himself: how many more hikes? If the answer keeps being “we’ll see,” expect those odds to move with each speech.
