Fed's Barkin: Rate Hike Direction Is Clear, AI Risks Call for More Caution on Policy Pace

on Nov. 10, citing Jinshi Data, Richmond Fed President Barkin stated that U.S. consumer demand remains resilient, with inflation consistently above the Fed’s 2% target. While the current direction of monetary policy is relatively clear, the pace of rate hikes must still be approached cautiously to address uncertainties in future demand.

Barkin specifically highlighted the dual risks of AI development: if AI technology underperforms expectations, it could lead to a contraction in corporate investment and a decline in equity markets, thereby weakening consumption; if AI advances exceed expectations and displace more jobs, it could also suppress demand, prompting the Fed to refocus on employment risks.

The market currently still leans toward a Fed rate hike in December. According to Bloomberg, trader pricing indicates an approximately 80% probability of a December rate increase. The Fed’s next policy meeting will be held on Dec. 8-9.