One Fed governor says interest rates should be raised if inflation persists

September 1, 2026 - 17:19

Federal Reserve governor Michael Barr indicated on Tuesday that the central bank may need to raise interest rates if inflation fails to cool sufficiently. Speaking at a conference in Washington, Barr said that while the current policy stance is restrictive, the Fed is prepared to act if price pressures remain elevated.

"We are watching the data closely," Barr said. "If inflation does not continue to move down toward our 2 percent target, I would support maintaining rates at current levels for longer, and if necessary, I would not rule out an increase."

His comments come as recent reports show inflation running hotter than expected, with consumer prices up 3.5 percent from a year ago. That is well above the Fed's target, and several policymakers have grown cautious about cutting rates too soon.

Barr stressed that the Fed's decisions will depend on incoming economic data, not a preset path. He noted that the labor market remains solid, which gives the central bank room to keep policy tight.

"The risk of moving too quickly and seeing inflation reaccelerate is greater than the risk of holding steady for a bit longer," he added.

Investors have already scaled back expectations for rate cuts this year. Futures markets now price in just one reduction by December, down from six at the start of 2024.

Barr's remarks echo those of other Fed officials, including Chair Jerome Powell, who recently said the central bank needs "greater confidence" that inflation is under control before easing policy.

The next policy meeting is scheduled for mid-June, and most analysts expect the Fed to hold rates steady in the 5.25 to 5.5 percent range.