Fed governor backs rate hike if inflation fails to ease enough

Federal Reserve Governor Michael S. Barr said the central bank should raise interest rates decisively if inflation does not show clearer signs of easing, adding pressure to policymakers two weeks before their September meeting.

"If it seems that inflation is not moderating enough, I think we should act decisively to raise interest rates," Barr said while discussing the choices facing the Federal Open Market Committee.

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If it seems that inflation is not moderating enough, I think we should act decisively to raise interest rates.

Barr said inflation remained too high and had done so for more than five years. He said its slowdown stalled in 2025 after a series of disruptions, including tariffs, conflict in the Middle East and the rapid deployment of artificial intelligence. Core services inflation excluding housing also remains elevated, he said.

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Inflation is still too high, and it has been for more than five years.

The governor said policymakers could take "some more time to assess" conditions only if the data gave them confidence that inflation was moderating and moving toward the 2% target. He warned that inflation staying above target for an extended period could allow broader price pressures to become entrenched.

Fed Chair Kevin Warsh expressed similar concern about rising prices at the Jackson Hole forum the previous week. He said summer readings for the personal consumption expenditures and consumer price indexes were better than expected, but did not establish a clear improvement trend. "We must be clear that inflation is moving toward our target clearly and at a sufficient speed. If not, we have work to do, because that is our mandate and our responsibility," Warsh said.

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We must be clear that inflation is moving toward our target clearly and at a sufficient speed. If not, we have work to do, because that is our mandate and our responsibility.