Barr Ready to Support Rate Hike if Inflation Fails to Ease

Federal Reserve Governor Michael Barr said he is prepared to support an interest rate hike if inflationary pressures in the United States show no signs of easing. His remarks have further strengthened expectations that the Fed could tighten monetary policy again in the near term.

Speaking at a banking forum in Washington on Tuesday, Barr said he was concerned that broader price pressures could become more deeply embedded in the economy. U.S. inflation has remained above the Fed’s 2% target for nearly five and a half years.

Barr said that if incoming data provides greater confidence that inflation is moving sustainably toward 2%, the Fed may still have room to wait and reassess its policy stance. However, if inflation does not moderate sufficiently, he believes the central bank should act decisively by raising interest rates.

His comments came as financial markets continue to face a combination of elevated inflation and rising U.S. Treasury yields. Barr is a permanent voting member of the Federal Open Market Committee (FOMC), giving his views significant weight in the Fed’s monetary policy decisions.

U.S. Treasury yields surged again amid growing concerns over geopolitical tensions in the Middle East. The benchmark 10-year Treasury yield climbed to levels not seen since mid-January 2025, adding further pressure to global financial markets.

A hawkish tone had also previously come from Federal Reserve Chair Kevin Warsh. His remarks last week were widely interpreted by markets as a signal that the Fed is becoming increasingly open to another rate hike, potentially as soon as the next policy meeting.

Barr previously supported the Fed’s decision in July to keep the benchmark interest rate unchanged in the 3.50%–3.75% range. However, markets on Tuesday were pricing in around a 66% chance of a rate hike in September, reflecting a significant shift in investor expectations.

Despite those concerns, Barr said the overall U.S. economy remains relatively solid. Consumer spending has so far remained resilient, but he stressed that inflation is still too high and has remained elevated for more than five years.

The latest inflation data showed headline prices rising 3.7% year-on-year, while core inflation, which excludes food and energy, stood at 3.3%. The Fed will receive another important update on inflation next week with the release of the Consumer Price Index (CPI) and Producer Price Index (PPI). (mrv)

Source: Newsmaker.id