Fed Governor Barr Signals Possible Rate Hikes Over Persistent Inflation

Federal Reserve Governor Michael Barr warned on September 1 that inflation remains too high and signaled the central bank is prepared to raise interest rates aggressively if upcoming data does not show price pressures moderating. Speaking at the Second Chance Lending Forum in Washington, D.C., Barr said the Fed will act decisively to cool inflation that has persisted above the 2% target for more than five years. Barr’s remarks, delivered just weeks before the Federal Open Market Committee’s September 15-16 meeting, underscored a hawkish shift in tone from some policymakers. He noted that while the economy is growing solidly and the labor market is stable with low unemployment, inflation remains elevated. “With inflation above target for a protracted period, there is a risk of broader price pressures taking hold, a risk I am watching closely,” Barr said. The governor’s comments follow a similar warning from Fed Chairman Kevin Warsh, who said at the Jackson Hole symposium last week that the central bank must be confident inflation is moving toward its objective “clearly and at sufficient speed.” Warsh’s speech significantly increased market expectations for a rate hike.