Federal Reserve Governor Michael Barr Says Central Bank Should Act Decisively to Raise Rates if Inflation Persists

Federal Reserve Governor Michael Barr stated that the central bank should act decisively to raise short-term interest rates if inflation does not trend downward sufficiently. Speaking at the Second-Chance Lending Forum, Michael Barr noted that inflation has remained above target for a protracted period, creating a risk of broader price pressures. He indicated that if data shows inflation moderating toward a 2% target, the Federal Reserve can take more time to assess its policy stance. However, he warned that current shocks, including tariffs, Middle East conflicts, and AI-related business investments, have pushed the economy off course. While the job market remains stable with low unemployment, markets are currently pricing in a high probability of a rate hike during the September meeting. Recent inflation data has been mixed, with the Consumer Price Index showing cooler reports for June and July, while the Personal Consumption Expenditures index has reported stickier prices. The Federal Reserve will receive two more inflation readings next week before the official policy meeting.

Sources

• RealEstateNews.com
  Mortgage rates approach 7% as Fed official floats rate hike
• Yahoo Finance
  Fed's Barr: If inflation doesn't moderate, the central bank should raise rates

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Paywall and unreadable sources

• WSJ
  A War That Won’t End Is Complicating the Fed’s Next Move
• Bloomberg.com
  Fed’s Barr Says Higher Rates Needed If Inflation Doesn’t Cool
• Reuters
  Fed's Barr open to rate hike if inflation does not moderate