Fed Governor Michael Barr Supports Further Rate Hikes Amid Strong PMI Data
Federal Reserve Governor Michael Barr stated that additional interest rate hikes are likely necessary to bring inflation back to the Fed's 2% target, following a recent increase after three years. Speaking at a housing affordability conference in Chicago, he emphasized the need for further adjustments and described last week’s quarter-point hike as an important step. The central bank raised its policy rate to a range of 3.75%-4%, with most participants expecting more hikes before year-end. The same day saw strong economic data from S&P Global showing U.S. business activity at the fastest pace in over five years, highlighted by a composite PMI reaching 58.4 and services and manufacturing indices hitting multi-year highs. However, input costs surged due to rising fuel prices and wage growth, adding upward pressure on inflation. Markets reacted swiftly with traders now assigning a high probability of another rate hike at the October FOMC meeting. The 2-year Treasury yield rose sharply in response.
