Fed's Barr warns rate hike possible if inflation stalls

Federal Reserve Governor Michael Barr warned that if inflation does not convincingly move toward the 2% target, the Fed should act decisively to raise rates, though he signaled the possibility of waiting for more data if inflation cools. He stressed that inflation has been too high for more than five years and that policy hinges on upcoming data, including the August jobs report and the next CPI readings. Barr noted that the broader economy remains solid and the labor market is stable, with AI investment contributing to growth, but persistent price pressures could necessitate tighter policy. Markets have priced in a likely rate hike at the September FOMC meeting, while Barr also left room for a more cautious stance if inflation trends improve. His remarks echo a growing cautious stance among Fed officials, as policymakers weigh whether to tighten further or wait for clearer evidence of cooling inflation. The timing of the next CPI release and other data will be crucial in shaping the committee’s path, with broader inflation risks keeping the debate open.