Federal Reserve Governor Michael Barr said the central bank should be prepared to raise interest rates decisively if inflation fails to show sufficient signs of cooling, warning that persistent price pressures remain a significant risk to the U.S. economy.
Speaking at an event in Washington on Tuesday, Barr noted that inflation has remained above the Federal Reserve’s target for more than five years, raising concerns that elevated price pressures could become increasingly entrenched.
Barr said policymakers can afford to remain patient if incoming economic data provides convincing evidence that inflation is moving sustainably toward the Fed’s 2% target.
“If the data trends give me confidence that inflation is moderating and moving toward the 2% target, then I think we can take more time to assess the policy stance,” Barr said in prepared remarks.
However, he emphasized that the Fed should be ready to tighten monetary policy further if progress on inflation proves insufficient.
“But if inflation doesn’t appear to be cooling by a sufficient margin, then I think we should act decisively and raise interest rates,” Barr said.
