The Economic Information Daily reported on the 30th that Federal Reserve Governor Barr stated on Tuesday (29th) that the central bank may need to further raise interest rates to ensure inflation returns to the 2% target in a timely manner. Speaking at the Detroit Economic Club, he noted that inflation remains above target and there is not yet a clear trend indicating a timely decline, so his baseline scenario still includes further monetary policy adjustments.
Barr pointed out that the U.S. economy is growing steadily, with resilient business investment and consumer spending, and the labor market remains solid. However, rising energy prices and increased investment demand related to artificial intelligence are putting upward pressure on prices. He believes that AI could help boost productivity and non-inflationary growth in the long term, but its short-term impacts on prices and the labor market remain uncertain.
*Williams Expects Possibly One More Rate Hike This Year*
Meanwhile, New York Federal Reserve Bank President Williams said that if the economy evolves broadly in line with expectations, it might be appropriate for the Fed to raise rates once more later this year. However, after the September rate hike, the central bank does not need to rush its next move and can first observe more economic data.
Williams noted that the Fed raised the target range for the federal funds rate to 3.75% to 4% in September, marking its first rate hike since 2023, giving policymakers more time to assess the economic and inflation landscape. He expects the timing of the next rate hike will still depend on data, and market bets on a rate hike at the October meeting may cool following his remarks.
Williams believes that energy prices and AI-related demand are currently the more significant inflation risks, while the upward impact of tariffs on goods prices has largely dissipated. There is currently no evidence suggesting that such supply shocks have evolved into broader, persistent inflationary pressures.
He forecasts U.S. inflation this year will be around 3.5%, declining next year to slightly above the Fed's 2% target, and expects inflation could return to 2% as early as 2028. (rc)
Barr pointed out that the U.S. economy is growing steadily, with resilient business investment and consumer spending, and the labor market remains solid. However, rising energy prices and increased investment demand related to artificial intelligence are putting upward pressure on prices. He believes that AI could help boost productivity and non-inflationary growth in the long term, but its short-term impacts on prices and the labor market remain uncertain.
*Williams Expects Possibly One More Rate Hike This Year*
Meanwhile, New York Federal Reserve Bank President Williams said that if the economy evolves broadly in line with expectations, it might be appropriate for the Fed to raise rates once more later this year. However, after the September rate hike, the central bank does not need to rush its next move and can first observe more economic data.
Williams noted that the Fed raised the target range for the federal funds rate to 3.75% to 4% in September, marking its first rate hike since 2023, giving policymakers more time to assess the economic and inflation landscape. He expects the timing of the next rate hike will still depend on data, and market bets on a rate hike at the October meeting may cool following his remarks.
Williams believes that energy prices and AI-related demand are currently the more significant inflation risks, while the upward impact of tariffs on goods prices has largely dissipated. There is currently no evidence suggesting that such supply shocks have evolved into broader, persistent inflationary pressures.
He forecasts U.S. inflation this year will be around 3.5%, declining next year to slightly above the Fed's 2% target, and expects inflation could return to 2% as early as 2028. (rc)
