Barkin says gradual rate hikes 'makes sense'

• Monetary policy is at a neutral level at this point.
• The policy direction is clear, the question is the speed, and a gradual pace "makes sense."
• Inflation is not expected to accelerate, but it is also not seen as declining at the moment.
• The cost pressures over the past 18 months, starting with tariffs, are broad and companies feel they must pass them on.
• Strong earnings are encouraging businesses to invest and keep their workers.
• Artificial intelligence plays a significant role in the current strong demand.

It is refreshing that a Fed official uses the term artificial intelligence rather than super intelligence. At least there is some independence left. Meanwhile, the discussion of 'gradual' hikes reinforces the December rate increase view, which already has an 82% probability. However, one could argue that the 62 basis points priced in for next year may be insufficient. Of course, that likely depends on what happens with inflation, tariffs, and war.