Richmond Fed President Tom Barkin explained how last week's decision to raise rates followed several developments this summer that made it hard to square a wait-it-out inflation posture with Chairman Kevin Warsh's vow to get inflation back to target. "If inflation's not going to come down relatively quickly, then you have to look in the mirror and say '...maybe we should do something about it.'"

The full passage from his remarks at the Economic Club of Washington, D.C.:

"The way I think about what happened is [Fed Chairman] Kevin [Warsh] took the job and he made a number of, I think, very profound calls. One of which is inflation's been high for whatever it was at the time, 62 months in a row, and we probably should do something about it. And if you had a conversation, and I had a conversation with a bunch of real estate people on this last night, you could argue two sides of that case. One side is, 'Yeah it's been high, but it's really being driven by oil prices, and tariffs, and the AI build out boom. A lot of these things are going to morph on the other side.' A good example of that would be gas prices, which if you go back to June had come down and were actually in the southern part of my district in the low 3s. And so you're like, 'OK, things are coming back to normal.'

Well, what happened over the summer is I think it just got a lot clearer to me and maybe to others that this gas price thing that was going to endure for a while. We had this Canada tariff thing. The tariff thing's going to endure for a while. The AI build out, this costs—Apple and a bunch of the other chip enabled tech providers raise their prices. So that's going into cost. You could add, by the way, healthcare costs, transportation costs, diesel. There's a lot of things you could throw into the cost base. And so if inflation's not going to come down relatively quickly, then you have to look in the mirror and say, 'Inflation looks like it's been here for a while, so maybe we should do something about it.' I think that's what happened."