Barr: Fed Must Hike Rates Further to Combat Inflation Pressures

Federal Reserve Governor Michael Barr emphasized the need for further interest rate hikes to combat elevated inflation risks in the US economy. He cited higher energy prices and increased investment in artificial intelligence as factors contributing to renewed inflation pressures.

Barr noted that inflation remains too high, with no clear path toward a timely return to the Fed's 2% target. He pointed out that employment conditions are solid, but risks to the labor market have eased somewhat.

The Governor expects US economic growth to strengthen from its current 2% pace in the first half of 2026, driven by business investment and consumer spending. However, he cautioned that AI adoption may lead to short-term disruptions in the labor market, requiring careful management by policymakers.