Fed Governor Barr Signals Openness to Rate Increase Should Inflation Persist

Federal Reserve Board Governor Michael Barr speaks about “Artificial Intelligence and the Labor Market” to the New York Association for Business Economics (NYABE) in New York City, U.S., Feb. 17, 2026.

Brendan McDermid | Reuters

Federal Reserve Governor Michael Barr indicated Tuesday that he would be willing to back an interest rate increase if inflationary pressures fail to subside.

Addressing a banking forum in Washington, the policymaker expressed concern over “broader price pressures taking hold,” noting that inflation has remained above the Fed’s 2% target for nearly five and a half years.

“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 stated in prepared remarks. “However, if inflation appears not to be moderating sufficiently, then I think we should act decisively to raise rates.”

His remarks arrive at a pivotal moment for monetary policy, set against a backdrop of persistently elevated inflation and climbing Treasury yields. As a governor, Barr holds a permanent voting seat on the rate-setting Federal Open Market Committee.

Amid renewed anxieties surrounding geopolitical tensions in the Middle East, yields rose again Tuesday, with the benchmark 10-year note reaching a level not observed since mid-January 2025.

Meanwhile, Fed Chairman Kevin Warsh delivered remarks last week that markets broadly interpreted as leaning in the direction of a rate hike, potentially as early as the upcoming policy meeting in two weeks. Barr had supported the July decision to maintain the benchmark funds rate within the 3.5% to 3.75% range, yet markets on Tuesday morning were pricing in approximately a 66% likelihood of an increase this month, based on the CME Group’s FedWatch tool.

Barr offered a generally positive assessment of the economy despite the ongoing inflation concerns.

“Consumer spending to date has been largely resilient,” he noted. “But inflation remains too high — and has been for over five years,” he added.

The most recent inflation data revealed headline prices climbing 3.7% over the past year, or 3.3% when excluding food and energy. The Fed will receive an additional set of inflation metrics next week with the release of the consumer and producer price indexes.

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