Fed’s Barr Signals Further Rate Hikes Likely Amid Persistent Inflation and Strong Growth Outlook
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- Fed’s Barr: Further rate hikes likely amid strong GDP growth.
- Barr: Economy “strikingly” resilient, “momentum” building, inflation risks persist.
- Markets price ~66% chance of hike; wages elevated, 2% inflation goal.
Federal Reserve Governor Michael Barr stated on Tuesday that further policy adjustments are likely necessary to return inflation to the central bank’s 2% target in a timely manner. Barr noted that risks to achieving the inflation goal have increased, and he does not observe a clear trend towards its timely return. He anticipates GDP growth to accelerate in the second half of the year from a 2% pace in the first half, with the labor market remaining solid, supported by business investment and consumer spending. Following these remarks, money markets have priced in a nearly 66% chance of a Federal Reserve rate hike by the October meeting, with odds rising to 94% for the December meeting.
Federal Reserve Governor Michael Barr reiterated on Tuesday that further interest rate increases are likely necessary to bring inflation down in a timely manner. Speaking in Detroit, Barr also noted “elevated wage rates in the skilled trades” and described the US economy’s resilience as “striking,” observing that “momentum seems to be building.” He further stated that the last rate hike was “appropriate,” underscoring the Fed’s data-dependent approach to achieving its dual mandate of maximum employment and price stability.