Fed’s Barr signals more rate hikes needed amid inflation risks

Investing.com -- Federal Reserve Governor Michael Barr said Tuesday that additional interest rate increases may be necessary as high energy prices and artificial intelligence investment have disrupted progress toward the central bank's 2% inflation target.

"I don't yet see a clear trend toward a timely return to 2%," Barr said in remarks prepared for the Detroit Economic Club. He noted that inflation remains too high and related risks have increased, while the labor market stays solid with decreasing risks.

"We need to recalibrate policy to get us in a better position that more evenly balances risks to both components of our dual mandate," Barr said.

Financial markets expect the Fed to implement another quarter-percentage-point increase at its October 27-28 meeting, following a rate hike earlier this month.

"In my base case, further policy adjustments are likely to be needed to ensure inflation comes down to target in a timely fashion," Barr said.

The Fed governor projected GDP growth to "pick up a bit" from its 2% pace in the first half of 2026 for the remainder of the year. Business investment and consumer spending continue to support the labor market, he said.

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