Fed’s Barr Calls For Rate Hike if Inflation Doesn’t Moderate Enough
Highlights
- William Barr said that they should decisively raise rates if inflation doesn't moderate sufficiently.
- The Fed is expected to hike rates at the September FOMC meeting.
- Some other Fed officials have voiced support for a rate hike.
Federal Reserve Governor Michael Barr is the latest official to voice support for a potential Fed rate hike if inflation persists. This comes ahead of the September FOMC meeting, where crypto traders are betting that the Committee could increase rates.
Barr Calls For Fed Rate Hike If Inflation Persists
In a speech he delivered today, Barr said they should act decisively to raise interest rates if inflation does not appear to be moderating sufficiently. On the other hand, he said they could take a bit more time to assess their policy stance if the data shows inflation is moderating toward their 2% target.
His comment about a potential Fed rate hike came as he noted that they have made progress with inflation down from the peak of over 7% in 2024. However, this progress has stalled because of shocks from tariffs and the U.S.-Iran war. Barr also cited the rapid AI buildout as another inflation shock.
As CoinGape reported, Fed Chair Kevin Warsh also warned in his Jackson Hole speech that inflation isn’t showing signs of slowing at the moment and vowed that the Fed will do whatever is necessary to bring it down to its target. This was the first time Warsh had hinted at a potential Fed rate hike.
Other officials, such as Fed President Beth Hammack, have also called for rate hikes as inflation persists. Hammack was notably among those who dissented in favor of a hike at the July FOMC meeting.
Odds Of A Hike Rise Above 70%
The odds of a Fed rate hike have climbed above 70% again as inflation concerns mount. Data from the top crypto prediction market platform Polymarket shows a 71% chance that the Fed will hike rates this year.
This hike could come as soon as the September FOMC meeting, with crypto traders betting on a 57% chance of a 25 bps rate increase. Inflation concerns are mounting again after fresh strikes between the U.S. and Iran, which have driven oil prices above $90.
Ahead of the September FOMC meeting, focus will be on CPI and PPI data, which could influence the Fed rate decision. The jobs report will also be released later this week, another data point that could support a Fed rate hike if the figures show the labor market remains strong.
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