Investing.com -- Fed Governor Michael Barr said Tuesday that if inflation fails to moderate sufficiently, the central bank "should act decisively to raise rates" at or after the September 15-16 FOMC meeting, driving market odds of a hike to 66%, up from just above 30% before Chair Kevin Warsh’s Jackson Hole speech on August 28.

Barr’s remarks compound a hawkish turn that has rattled equity markets at the start of September. Ahead of Tuesday’s open, S&P 500 E-minis were down 0.61% and Nasdaq 100 futures were falling 1.20%, as rising bond yields and higher oil prices added pressure on what is historically the weakest month for U.S. stocks.

The governor, speaking in prepared remarks for the Second Chance Lending Forum, painted a stark picture of the inflation problem. "Inflation remains too high — and has been for over five years," Barr said. He noted that progress from a peak above 7% in 2022 had stalled in 2025, driven by tariff pass-through, Middle East conflict-driven energy costs, and the rapid AI investment buildout. The Fed’s preferred gauge, the PCE price index, stood at 3.7% year-over-year in July 2026, while core PCE rose 3.3% annually, the highest since 2023.

Barr did leave a conditional door open. "If trends in the data give me some confidence that inflation is moderating on a path to 2%, then I think we can take a bit more time to assess our policy stance," he said. But the threshold is explicit: absent that confidence, he wants action. The Fed’s benchmark rate has sat in the 3.50%-3.75% range since December 2025, and three FOMC members had already dissented in favor of a hike at the July 28-29 meeting.

Barr’s stance aligns closely with the signal Warsh sent at Jackson Hole on August 28. "We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do," Warsh said. That speech triggered an immediate repricing in rates markets and pushed Barclays to revise its outlook: the bank now expects two additional 25-basis-point hikes this year, one in September and one in December, a reversal from its prior call for rates unchanged through year-end.

The rate-hike risk most directly weighs on long-duration growth equities and rate-sensitive sectors. Higher short-term rates would also strengthen the dollar and compress the multiple on technology stocks that have driven index gains, making the Nasdaq’s steeper pre-market drop the more telling signal from futures markets Tuesday morning.

Several data releases now stand between markets and the September 15-16 decision, starting as soon as today. JOLTS Job Openings for July are due at 10:00 ET this morning, with consensus at 7.33 million versus the prior reading of 7.359 million; as the first major labor-market read of the week, the print could immediately shift rate expectations if it surprises materially in either direction. On Wednesday, the ADP Nonfarm Employment Change for August (forecast 48,000 vs. the prior 44,000) will serve as a private-payrolls preview ahead of the main event.

August nonfarm payrolls, due Friday, September 4, carry a consensus forecast of 58,000 jobs after July’s -23,000 shock, with the unemployment rate seen steady at 4.1%, according to the brief’s event calendar. A weak print could temper the hawkish case by raising dual-mandate concerns, while a resilient labor market would give the FOMC little reason for restraint.