A Fed official said he would support a rate hike if inflation does not slow down
The Fed will announce its interest rate decision on September 16 / Photo: Rob Crandall / Shutterstock.com
Federal Reserve Governor Michael Barr stated that he would be prepared to support an increase in interest rates if price growth does not begin to slow. The probability of a rate hike has risen sharply following remarks by Fed Governor Kevin Warsh in Jackson Hole last week: he explicitly stated that inflation is currently too high, and if this continues, the Fed will have to take action.
Details
If macroeconomic data show that inflation is slowing toward the Fed’s 2% target, the central bank will be able to continue its pause, giving itself a little more time to assess current monetary policy, Barr said on September 1, according to CNBC. But if inflation does not slow down quickly enough, the Fed should “act decisively and raise rates,” the governor noted.
At the same time, many Fed officials still expect inflation to slow without a rate hike, according to Bloomberg. At the Fed’s July meeting, Barr voted to keep rates unchanged, and that decision was ultimately adopted. However, three members of the Federal Open Market Committee (FOMC) voted in favor of a rate hike at that time.
Context
Fed officials are currently discussing how to respond to persistent inflationary pressures stemming from rising oil prices due to the war with Iran, a new round of tariffs, and rising demand linked to the construction of AI data centers, Bloomberg notes. The Fed will receive new inflation data on September 11 with the release of the August Consumer Price Index report. The regulator’s next meeting will take place on September 15–16, Bloomberg notes.
Expectations of a rate hike intensified following Fed Chair Kevin Warsh’s remarks on August 28. He stated that inflation is not slowing significantly and warned that the Fed would have to take action if price pressures do not ease soon.
Traders currently estimate the probability of a rate hike in September at 66.9%, according to the CME Group’s FedWatch tool. Just a week ago, on August 25, that figure was only 39.6%.
This article was AI-translated and verified by a human editor
