"""

Barr sends a tightening signal ahead of the Fed meeting

Fed rate hike expectations strengthened after Fed Governor Michael Barr said stronger action may be needed if inflation does not slow sufficiently toward the target. Barr said the Sept. 15-16 monetary policy meeting offers an important backdrop for considering another rate increase, depending on how the data evolve.

In prepared remarks for the Second Chance Lending Forum in New York, Barr stressed that inflation has remained too high for more than five years. According to Barr, if the data provide enough confidence that price pressures are moving toward the 2% target, the Fed could gain a little more time to reassess its policy stance.

Markets are pricing in a 25-basis-point hike this month

Current rate range and expectations

Financial markets expect the Fed to raise its benchmark overnight interest rate by 25 basis points at this month’s meeting. The expectation comes as the policy rate remains in the 3.50%-3.75% range, while inflation continues to run above the Fed’s official target and several officials have signaled openness to another increase.

  • The Fed’s inflation target stands at 2%.
  • Market pricing points to a quarter-point hike in September.
  • Officials say the final decision will depend on economic data.

Economic resilience supports a tighter stance

Investment and employment outlook

Barr said the U.S. economy is performing solidly, supported in particular by investment in artificial intelligence technologies. He added that the labor market remains stable with relatively low unemployment, suggesting this backdrop gives the Fed room to keep fighting inflation.

In line with Warsh’s message

Fed Chair Kevin Warsh also said last week at the Jackson Hole economic symposium in Wyoming that the central bank must be sure underlying inflation is moving clearly and fast enough toward target. Read together, Warsh’s message and Barr’s latest assessment suggest markets are still expecting additional tightening ahead of the September meeting.

"""