Federal Reserve Governor Barr said on the 29th that progress toward the Fed's 2% inflation target has "gone off track," reiterating the need for additional rate hikes. According to the text of a speech at the Detroit Economic Club, Governor Barr said "no clear trend toward a timely return to 2% is yet visible," noting that inflation is too high and the risks of bringing it back to target are rising, while the labor market remains solid and risks are declining. In financial markets, there is a strong view that the Fed, following this month's rate hike, will raise rates by another 0.25 percentage point at the Federal Open Market Committee meeting on October 27-28. Governor Barr said, "In my baseline scenario, further policy adjustments will likely be needed to bring inflation down to target in a timely manner." He said GDP growth in the second half of 2026 is expected to "accelerate somewhat" from the 2% pace in the first half.
Fed Governor Barr signals further rate hikes are likely needed, implying the effective federal funds rate will rise.
Hawkish Fed commentary pointing to additional rate hikes pushes Treasury yields higher, so the 10Y yield rises.
