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Fed's Barr leaves door open for further rate hikes.
Economy
Federal Reserve Governor Michael Barr stated on Tuesday that further interest rate hikes might be necessary,
as high energy prices and investments in artificial intelligence have disrupted progress toward the central bank's 2% inflation target.
"I do not yet see a clear trend toward a timely return to the 2% level," Barr said in a speech prepared for the Detroit Economic Club. He noted that inflation remains too high and associated risks have increased, while the labor market remains resilient with diminishing risks in that area.
"We need to adjust policy to adopt a more balanced stance that gives equal weight to risks regarding both components of our dual mandate," Barr said.
Financial markets expect the Fed to implement another quarter-percentage-point rate hike at the October 27–28 meeting, following the increase earlier this month.
"In my baseline scenario, further policy adjustments will likely be required to ensure a timely decline in inflation to the target level," Barr noted.
The Fed Governor projects that the pace of GDP growth will "accelerate somewhat" from the 2% level seen in the first half of 2026 during the remainder of the year. According to him, business investment and consumer spending continue to support the labor market.