The Federal Reserve should proceed carefully as it evaluates its response to inflation, Richmond Fed President Tom Barkin said Monday, emphasizing that price pressures remain the central risk facing the U.S. economy. His comments reinforce the uncertainty surrounding the December policy meeting, with the Fed still dependent on incoming economic data before determining its next move.

Barkin Avoids Committing to December Policy Path

Speaking to journalists after a local chamber of commerce event in Greer, South Carolina, Barkin said he does not have a base case for the December meeting. Rather than signaling a predetermined policy direction, he said policymakers would assess another inflation reading and another employment report before reaching a decision.

“We are going to get to the meeting and figure it out,” Barkin said, underscoring the data-dependent approach that has become central to the Fed’s policy framework. His position leaves open the possibility of different policy outcomes depending on how inflation and labor-market conditions evolve over the coming weeks.

Inflation Remains the Primary Concern

Barkin identified inflation as the greatest risk, highlighting the challenge facing policymakers as they attempt to balance price stability against the broader condition of the economy. Persistent inflation can limit the Fed’s ability to ease financial conditions, particularly if businesses continue to experience higher operating costs.

According to Barkin, businesses are confronting rising costs and looking for ways to pass those expenses along to customers. Such behavior can make inflation more persistent by allowing higher input costs to move through supply chains and ultimately into consumer prices.

Business Pricing Decisions Complicate Fed Outlook

The behavior of businesses is particularly important for monetary policymakers because cost pressures can influence inflation even when demand conditions change. If companies continue raising prices to protect margins, the resulting pressure can complicate the Fed’s assessment of whether inflation is moving sustainably toward its objective.

That dynamic leaves policymakers watching both official inflation data and evidence from businesses. Pricing decisions, wage pressures and demand conditions could help determine whether current inflation reflects temporary cost pressures or a more persistent trend requiring a restrictive monetary response.

Data Will Shape December Decision

Barkin’s comments reinforce the importance of the economic reports due before the Fed’s December meeting. Rather than committing to a particular policy outcome, he indicated that policymakers will have additional information on both inflation and employment before making their decision.

For financial markets, the uncertainty could keep attention focused on incoming data and Fed communication. Expectations for interest rates can influence Treasury yields, the U.S. dollar and global financial conditions, making the Fed’s assessment relevant well beyond the domestic economy. For investors in Israel and other international markets, shifts in U.S. monetary expectations can also affect currency conditions and the relative attractiveness of dollar-denominated assets.

Going forward, the key signals will be whether inflation shows further evidence of persistence and whether businesses continue passing higher costs to consumers. Barkin’s emphasis on moving “with care” suggests that the December decision will depend heavily on the balance between price pressures and labor-market conditions, with policymakers retaining flexibility as the latest data becomes available.