FED: Gov Barr: Base Case Is For Further Hikes
Gov Barr (permanent FOMC voter)'s speech Tuesday: is primarily on the longer-term outlook for the housing sector, but importantly he notes that his "base case" is for "further policy adjustments" (plural). His outlook for multiple further hikes suggests that he is on the more hawkish end of the FOMC, given that only 4 participants at the September meeting saw two more hikes to 4.375% by end-2026 and 8 (of 18 members) with rates at 4.375% at end-2027. * Barr: "Our economy has experienced a series of shocks over the past year and half: the imposition of tariffs, the conflict in the Middle East and continued disruptions from Russia's war on Ukraine, and, more recently, a surge in investment demand to support the artificial intelligence (AI) buildout. These shocks have contributed to upward price pressures." * "Economic growth is strong and the labor market is solid, but inflation is above our 2 percent target and not clearly trending toward target in a timely way. Moreover, risks to achieving our inflation target have increased, while risks to the labor market have receded." * "We needed to recalibrate monetary policy to reflect the balance of risks to our mandate goals. The FOMC took
Gov Barr (permanent FOMC voter)'s speech Tuesday: is primarily on the longer-term outlook for the housing sector, but importantly he notes that his "base case" is for "further policy adjustments" (plural). 375% at end-2027. * Barr: "Our economy has experienced a series of shocks over the past year and half: the imposition of tariffs, the conflict in the Middle East and continued disruptions from Russia's war on Ukraine, and, more recently, a surge in investment demand to support the artificial intelligence (AI) buildout.
" * "Economic growth is strong and the labor market is solid, but inflation is above our 2 percent target and not clearly trending toward target in a timely way. " * "We needed to recalibrate monetary policy to reflect the balance of risks to our mandate goals. The FOMC took important action to that end last week by increasing the policy rate, which I supported. " * "In my base case, further policy adjustments are likely to be needed to ensure inflation comes down to target in a timely fashion.
" * Recall that prior to the most recent meeting, Barr wasn't quite certain on an imminent rate increase, noting raising interest rates may be necessary in September if inflation was not moderating sufficiently, but he would be open to waiting if inflation appeared to be on a path to 2%.