Fed Governor Barr Signals Further Policy Tightening as Inflation Risks Escalate

Federal Reserve Governor Michael Barr signaled that additional policy adjustments and rate increases are likely needed as upside risks to inflation rise. Speaking at the Detroit Economic Club, Barr cautioned that the Fed has been knocked off course from its 2% target, with PCE inflation above target for 5.5 years and only two of the past 20 months aligning with the core target pace. Despite restrictive policy, U.S. GDP expanded at roughly 2% in the first half of 2026, with Barr expecting growth to pick up in the second half driven partly by artificial intelligence infrastructure investments.