Fed’s Barr: If inflation doesn’t moderate, the central bank should raise rates
Federal Reserve governor Michael Barr said Tuesday that if inflation doesn’t come down adequately, the central bank should raise interest rates.
Ahead of the Fed policy meeting in just over two weeks, Barr said the outlook for inflation and the economy will top the agenda.
“If trends in the data give me some confidence that inflation is moderating on a path to 2%, then I think we can take a bit more time to assess our policy stance,” Barr said, according to prepared remarks. “However, if inflation appears not to be moderating sufficiently, then I think we should act decisively to raise rates.”
The Fed will get two more readings on consumer and wholesale inflation <a href="https://bitcomme.com/the-next-cybersecurity-battleground-is-inside-the-processor/” title=”The next cybersecurity battleground is inside the processor”>next week before the meeting on Sept. 16. Recent inflation data has been mixed, with back-to-back cooler reports on the Consumer Price Index for June and July and one stickier report on the Fed’s preferred inflation gauge, the Personal Consumption Expenditures index.
Still, Barr said inflation remains too high, pointing to a series of shocks — from tariffs to the conflict in the Middle East to the rapid AI build-out — that “pushed us off course.”
“With inflation above target for a protracted period, there is a risk of broader price pressures taking hold, a risk I am watching closely,” he said.
Barr said he views the job market as stable, with relatively low unemployment, and the economy is solid, powered in part by the boom in AI-related business investment.
Last Friday, Fed Chairman Kevin Warsh put a rate hike back on the table in his closely watched speech in Jackson Hole, Wyo., hinting that current interest rates may not be high enough. “I would be hard-pressed to describe broad financial conditions as restrictive.”
Markets are pricing in a 66% chance of a rate hike for the September meeting, up from just above 30% before Warsh’s speech.
Jennifer Schonberger is a veteran financial journalist covering markets, the economy, and investing. At Yahoo Finance, she covers the Federal Reserve, Congress, the White House, the Treasury, the SEC, the economy, cryptocurrencies, and the intersection of Washington policy with finance. Follow her on X@Jenniferismsand onInstagram.
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