TLDR
- Fed Governor Michael Barr said more rate hikes may be needed to bring inflation down to 2%.
- Barr said inflation risks have increased while risks to the labor market have cooled.
- The Fed raised rates in September for the first time since 2023.
- Polymarket odds of an October rate hike have fallen to 50% from a high of 70%.
- Traders are waiting on PCE inflation data this week and Friday’s September jobs report.
Federal Reserve Board Governor Michael Barr said the central bank may need to raise interest rates again. He said the goal is to bring inflation down to the Fed’s 2% target.
His comments came during a speech in Detroit on September 29. At the same time, crypto traders have lowered their bets on another rate hike in October.
Barr Says More Hikes May Be Needed
Barr said that in his base case, the Fed may need to raise rates further. He said this would help make sure inflation comes down to the target in a timely way.
“We want to support sustainable, durable growth in support of maximum employment, and price stability is crucial to that,” he said.
His remarks come just weeks after the Fed raised rates at its September meeting. That move was the first rate hike since 2023.
Barr said the Fed needs to address risks to reaching its inflation goal. He added that the central bank is in a good position to raise rates more because the economy is strong and the labor market is solid.
He also said inflation risks have gone up. At the same time, he noted that downside risks to the labor market have cooled.
Because of this, Barr believes the Fed should recalibrate its policy. He said the aim is to better balance the risks between inflation and jobs.
Barr is one of several Fed officials who have raised concerns about rising inflation. These worries have grown as the U.S.-Iran war pushes energy prices higher.
Traders Lower Odds of an October Rate Hike
Despite Barr’s comments, crypto traders have cut their bets on an October rate hike. An October hike would be the Fed’s second this year.
Data from prediction market Polymarket shows a 50% chance that the Fed will raise rates in October. That is down from a high of 70%.
Traders are now watching for new inflation data. The Personal Consumption Expenditures (PCE) report is due this week, and markets expect the annual inflation rate to stay at 3.3%.
A lower inflation reading could push the odds of an October hike down further. A reading in line with forecasts or higher would support the case for another increase.
The September jobs report is set for release on Friday. That data could also shape the Fed’s October decision.
Bitcoin and the wider crypto market are holding steady ahead of these reports. Prices have shown little movement as investors wait for the new data.
