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Fed Governor Michael Barr says further tightening likely

Barr said inflation remains above the Fed’s 2% target and is not clearly trending to it, with risks now tilted to price stability.

Reported · Written up by our desk · Central Banks

Federal Reserve Governor Michael Barr said the Fed has fallen “out of position” as inflation risks have increased and labor-market risks have receded, arguing that last week’s rate hike was an adjustment “in the right direction,” according to remarks at a housing affordability summit in Chicago.

Barr said economic growth is still strong and the labor market remains solid, but inflation is still above the Fed’s 2% goal and “not clearly trending toward target in a timely way,” leaving room for additional “policy adjustments” to bring inflation back to target.

He attributed the renewed inflation challenge to multiple sources of upward price pressure, including tariffs, the Middle East conflict, disruptions linked to Russia’s war on Ukraine, and the AI investment boom.

Barr also pushed back on the idea that lower Fed rates alone can solve housing affordability, saying mortgage rates depend on monetary policy but are also influenced by other factors, while the deeper affordability problem reflects a chronic shortage of housing supply.

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