FOMC Must Hike Rates if Elevated Inflation Persists, Fed Governor Barr Says

12:46 PM EDT, 09/01/2026 (MT Newswires) -- The US central bank should raise interest rates unless inflation cools down as hoped, Federal Reserve Governor Michael Barr said Tuesday, adding to a growing chorus of hawkish views from policymakers. Barr said price pressures remain elevated, which he warned could persist and become widespread. The Fed's preferred inflation metric -- the personal consumption expenditure price index -- held steady at 3.7% year over year in July, well above its 2% target, data released last week showed. The annual core rate, which excludes food and energy, was unchanged at 3.3% in July. The August consumer price index report is scheduled for a Sept. 11 release, days ahead of the Federal Open Market Committee's Sept. 15-16 policy meeting. "If trends in the data give me some confidence that inflation is moderating on a path to 2%, then I think we can take a bit more time to assess our policy stance," Barr said in prepared remarks for an event in Washington, D.C. "However, if inflation appears not to be moderating sufficiently, then I think we should act decisively to raise rates." In his debut Jackson Hole speech as Fed chief on Friday, Kevin Warsh said that the central bank's primary focus should be on prices, given that the US is doing well on the employment front. In July, the FOMC kept the policy rate steady for the fifth consecutive time, while three regional Fed presidents called for a hike as they voiced concerns over elevated inflation. Those dissenters were Beth Hammack of Cleveland, Neel Kashkari of Minneapolis and Lorie Logan of Dallas. "With inflation above target for a protracted period, there is a risk of broader price pressures taking hold, a risk I am watching closely," Barr said. Markets are currently pricing in a 66% chance that the FOMC will hike the key rate by 25 basis points at its September meeting, compared with about 40% a week ago. The probability that the Fed will keep rates steady fell to 34% from 60%. A day before Warsh's speech, Hammack told CNBC that the FOMC should act now to cool inflation. Previously, Boston Fed President Susan Collins said that the central bank may have to tighten its monetary policy soon, unless inflation moderates. Barr views the labor market as stable with relatively low unemployment.