Federal Reserve Director Michael Barr said on Tuesday the central bank remains open to raising interest rates further if inflation does not show clear signs of moderating toward the 2% target.
Speaking at the Second Chance Lending Forum in New York, Barr noted that inflation has remained "too high for more than five years," underscoring the urgency of sustained progress. He emphasized that the Federal Open Market Committee would act decisively to increase borrowing costs if incoming data fail to demonstrate sufficient disinflation. "If inflation does not appear to be moderating sufficiently, then I think we should act decisively to raise interest rates," Barr said.
The Fed's benchmark rate currently stands in a range of 3.50% to 3.75%. Financial markets have priced in a 25-basis-point increase at the upcoming policy meeting on September 15-16, reflecting growing expectations of tighter monetary policy.
Barr also indicated that the central bank would maintain its restrictive stance if data trends provide confidence that inflation is moving sustainably toward target. "If the data trends give me some confidence that inflation is moderating toward 2%, then I think we can wait a little longer to assess our monetary policy stance," he added.
The remarks align with signals from other Fed officials, including Kansas City Fed President Kevin Warsh, who stated at the Jackson Hole economic symposium that policymakers must ensure underlying inflation is "moving toward our goal, clearly and with sufficient speed."
Barr highlighted the economy's solid performance, driven in part by investments in artificial intelligence, while describing the labor market as stable with relatively low unemployment. Despite these positive indicators, he reiterated the Fed's focus on bringing inflation sustainably to 2%.
