Federal Reserve Governor Michael Barr said on Tuesday that if inflation does not come down quickly, the Fed should be ready to raise interest rates. In a speech, Barr noted that "inflation is still too high" and, looking ahead to the Federal Open Market Committee (FOMC) meeting on the 15th and 16th, stated that "if inflation does not appear to be slowing sufficiently, we should firmly proceed with a rate hike." However, he also said that if there is confidence that inflation is slowing toward the 2% target, the Fed could take a bit more time to assess the policy stance. He expressed the view that the U.S. economy remains solid, supported by AI-related investment, and the labor market is stable. The Fed held its federal funds rate target range at 3.50%-3.75% at the July FOMC meeting, but market expectations for a rate hike this month have been rising.
Fed's Barr signals potential rate hike if inflation persists, raising policy rate expectations.
Hawkish Fed comments push Treasury yields higher, increasing 10Y yield.
