Fed’s Michael Barr Says More Hikes Likely Needed as October Rate Hike Odds Fall
Highlights
- Michael Barr opined that further rate hikes may be needed to bring inflation down.
- He noted that the risks to the achieving 2% inflation has increased.
- The odds of an October Fed rate hike is at 50%.
Federal Reserve Board Governor Michael Barr has reiterated that the Fed may need to raise rates further to bring inflation down to its 2% target. This comes as crypto traders reduce their bets on a potential October Fed rate hike, which would be the second hike this year.
Michael Says More Fed Rate Hikes Likely Needed
In a speech in Detroit, the Fed governor said that, in his base case, they may need to raise rates further to ensure inflation comes down to their target in a timely fashion. “We want to support sustainable, durable growth in support of maximum employment, and price stability is crucial to that,” he said.
His comment comes just weeks after the Fed delivered the first rate hike since 2023 at the September FOMC meeting. Barr warned that they need to address risks to achieving their inflation target and suggested that they were in a good position to make more Fed rate hikes with the economy strong and the labor market solid.
He also noted that inflation risks had increased while downside risks to the labor market had cooled. As such, he believes they need to recalibrate policy to better balance inflation and labor market risks.
Barr is among a host of Fed officials who continue to raise concerns about rising inflation. These inflation concerns have increased amid Middle East uncertainty, with the U.S.-Iran war driving energy prices higher.
Odds Of A Rate Increase In October Fall
Crypto traders have reduced their bets on an October Fed rate hike despite Barr’s statement that more rate increases are needed. Data from the top prediction market platform Polymarket shows a 50% chance that the Fed will raise rates, down from a high of 70%.
This comes ahead of tomorrow’s release of PCE inflation data, with the market expecting the annual figure to remain unchanged at 3.3%. A lower inflation print could further crash the odds of an October hike. However, an in-line or higher reading would support the case for the Fed to make another hike.
Meanwhile, the September jobs report drops this Friday, another macro data which could influence the October Fed decision. Bitcoin and the broader crypto market are currently holding steady ahead of the rlease of these macro data.
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