- Key insight: Federal Reserve Gov. Michael Barr, a voting member of the Federal Open Market Committee, said Tuesday inflation has been too high, but said he would not commit to any specific action until he sees more data.
- Expert quote: "With inflation above-target for a protracted period, there is a risk of broader price pressures taking hold, a risk I am watching closely." — Federal Reserve Gov. Michael Barr
- Forward Look: Barr and other FOMC members will use forthcoming employment and inflation data from August to determine the best stance of monetary policy.
Federal Reserve Gov. Michael Barr is ready to act "decisively to raise rates" — but only if August inflation data comes in hot.
In a Tuesday morning speech, Barr said he is open to either hiking interest rates at this month's Federal Open Market Committee or holding them steady, depending on what the data calls for.
"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," he said at the Second-Chance Lending Forum in Washington, D.C. "However, if inflation appears not to be moderating sufficiently, then I think we should act decisively to raise rates."
Barr's remarks are the first by a Fed governor — aside from the Fed Chair Kevin Warsh's
Financial markets have favored a rate hike since Warsh's speech last week, which was viewed by analysts and observers as striking a staunchly anti-inflationary tone. But, as Barr noted, the committee's move will ultimately be determined by this week's jobs report and next week's consumer price index inflation reading.
During the last FOMC meeting in July, Barr joined the group's nine-member majority in voting to hold the federal funds rate unchanged at 3.5% to 3.75% to await more data on the economy. While other members of the policy committee have sounded alarm bells about persistently high inflation — including the three reserve bank governors who voted for a hike in July — Barr has said relatively little about prices.
In his Tuesday speech, Barr said the economy is growing "solidly" and the labor market is "stable," but "inflation remains too high — and has been for over five years."
Barr blamed the resurgence of inflation in 2025 on "a series of shocks" that included tariffs, war in the Middle East and large-scale investment in artificial intelligence, adding that "core non-housing services inflation remains elevated" too.
"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.
Read more:
- These are the
Top Performing Banks of 2026 in four asset tiers - New York bank
regulator says vendor flaw hit its firms - The
best credit unions to work for in 2026 Tokenized deposits are here . Banks need to manage the risks.
Since the last FOMC meeting,
Proponents of a rate hike have not been deterred by the complicated collection of data. In an interview with CNBC during the Fed's Jackson Hole Symposium, Federal Reserve Bank of Cleveland President Beth Hammack — one of the three dissenters at the last FOMC meeting — reaffirmed her belief that inflation should be dealt with sooner rather than later.
"I don't want to prejudge anything. But I believe now is the time to act," Hammack said. "I believe that we've been in an inflationary situation for more than five years. It's been running well above our target. I don't see any restriction in policy when I look at financial conditions and when I talk to market participants."
Federal Reserve Bank of Dallas President Lorie Logan and Federal Reserve Bank of Minneapolis President Neel Kashkari also voted for a hike in July. Non-voting FOMC members Jeffrey Schmid and Alberto Musalem, heads of the Kansas City Fed and St. Louis Fed, respectively, also have come out in favor of a hike.
Other Fed officials, including Fed Gov. Christopher Waller, are scheduled to speak publicly this week, potentially providing more insight into how the committee might react to incoming data. Next week, the FOMC begins its two-week communications black out heading into its September meeting.
As of Tuesday morning, two-thirds of federal funds futures contracts have priced in a quarter-point hike, a view
In an interview with CNBC on Monday, Treasury Secretary Scott Bessent — who speaks with Warsh regularly about the state of the economy — said the fact that prices have risen because of supply-side shocks means the Fed should stay put.
"I'm not going to speculate on what the Fed may do or not," Bessent said. "It is my belief that we've seen a supply shock and, traditionally, you don't raise into a supply shock unless you see second- or third-order effects, and we are seeing the core inflation has remained very restrained."
