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Fed Governor Michael Barr ties September rates to inflation outlook
Barr said the Fed could take more time to assess policy if inflation trends toward 2%, but warned it should raise rates decisively if price growth fails to moderate.
Fed Governor Michael Barr signaled that a September rate hike remains on the table, arguing the US economy is still solid while inflation is not yet low enough to justify loosening policy, according to remarks delivered Tuesday in Washington, D.C.
Barr pointed to a stable labor market, relatively low unemployment, and consumer spending that has remained resilient, including support from AI-related investment, as factors that give the Fed room to focus on inflation rather than growth weakness.
He said inflation has stayed too high for more than five years and that progress toward disinflation stalled in 2025, with tariffs, conflict in the Middle East, and rapid AI investment cited as contributors.
Barr said the September decision is explicitly conditional on incoming data: if inflation confidence improves toward 2%, the Fed can take more time, but if inflation appears not to be moderating sufficiently, he expects the Fed should act decisively to raise rates.