Richmond Fed chief says it's time to push back on inflation

WASHINGTON — Three months ago, Tom Barkin saw gasoline prices were coming down and the effects of tariffs subsiding.

Three months later, "it didn't seem to have lasted," said Barkin, president of the Federal Reserve Bank of Richmond and a member of the Federal Reserve Board committee that adjusts interest rates to either stimulate the United States economy or slow down inflation.

"You have to ask yourself, how much patience do you have for these quote-unquote 'temporary' factors to normalize?" he said in remarks to news media after an appearance on Thursday at The Economic Club of Washington, D.C.

The answer is not much, as the Federal Reserve Board raised the overnight lending rate by a quarter of a percentage point last week, with markets expecting another hike by the end of the year to try to curb inflation. It was the first time in three years that the Fed had raised its benchmark interest rate — now ranging from 3.75% to 4% — as inflation has refused to abate with the Iran war driving up oil prices and U.S. tariff policies putting pressure on consumer goods.

Barkin is hopeful about the U.S. economy, with artificial intelligence driving an investment boom and the job market stable. But he acknowledges that companies still aren't hiring many employees — especially recent college graduates with technology degrees — and inflation remains too far above the Fed's target of 2% annual growth.

"Where we are today is a reasonable equilibrium — it's not a normal equilibrium," he said during a nearly hourlong public discussion with Barbara Humpton, chief executive officer of a rare earth minerals company and a member of the Richmond Fed Board of Directors.

Virginia's economy also has been sending mixed signals. Inflation is up, mostly because of fuel prices and tariff costs, but consumers are spending, and state revenues, including sales tax collections, are ahead of forecast.

The state picked up jobs last month and unemployment dipped, but the labor participation rate hit a record low, as Baby Boomers retire and federal immigration policy reduces the flow of foreign workers.

Data centers and AI investment drive the state's economic growth, but they face a massive public backlash and political headwinds in Richmond.

For Barkin, who has been giving speeches around the region since the Fed action on interest rates last week, the current "problem child" is inflation, not employment.

The Fed targets inflation to increase by about 2% a year, but it increased by 3.4% in August on an annual basis, according to the Consumer Price Index. The Personal Consumer Expenditures index, the Fed's tool for measuring inflation, rose by 3.7% in July — 3.3% after excluding the cost of fuel and food.

But consumers need both fuel and food, and those costs continue to go up, partly because of the effects of the war that the U.S. and Israel launched against Iran on Feb. 28 and partly because of higher tariffs that President Donald Trump has imposed on goods from major trading partners, including Canada, which is the largest market for Virginia exports.

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