Barr Sees Policy Adjustments Needed to Tame Inflation as AI Fuels Growth

Federal Reserve Governor Michael Barr said that policy adjustments are likely needed to lower inflation in the US economy, which has been affected by persistent inflation, geopolitical uncertainty, and a surge in investment tied to artificial intelligence. Speaking at the Detroit Economic Club on September 29, 2026, Barr noted that real gross domestic product grew at roughly a 2% rate in the first half of 2026.

Barr stated that while economic growth has been strong and the labor market is solid, further policy adjustments are likely needed to ensure inflation comes down to target in a timely fashion. He cited the war with Iran as pushing energy prices and inflation higher, and the surge in AI investment having a measurable effect on prices.

The Fed governor also highlighted the impact of AI on the economy, saying that it is creating new demand and adding to supply shocks from tariffs and the conflict in the Middle East. Barr expressed optimism about the long-term benefits of AI, which could improve productivity and raise living standards, but emphasized the need for careful management of potential short-term disruptions in the labor market.

Barr also acknowledged that bringing inflation back to the Fed's 2% target is essential to eventually lower mortgage rates, auto loans, and other borrowing costs. He stressed that managing inflation effectively will allow businesses and individuals to plan for the future without worrying about rising prices.