The Fed: Fed’s biggest question is how long to keep interest rates high, Barr says

by | Oct 2, 2023 | Stock Market

Federal Reserve Gov. Michael Barr says the biggest challenge for the central bank is to decide how long to keep interest rates high to make sure inflation is tamed. “In my view, the most important question at this point is not whether an additional rate increase is needed this year or not, but rather how long we will need to hold rates at a sufficiently restrictive level to achieve our goals,” Barr said in a Monday speech in New York.

“I expect it will take some time,” said Barr, who is also the Fed’s vice chairman of supervision. The Fed two weeks ago left its benchmark short-term interest rate unchanged at a range of 5.25% to 5.5%. But it also left open the door for another rate hike before year-end if inflation doesn’t slow further toward the Fed’s 2% target. Barr pointed out that the rate of inflation has slowed quite a bit since he joined the Fed last year. The annual increase in prices decelerated to just under 4% last month from a 40-year peak of 9.1% in 2022. Barr also said the full effects of higher borrowing costs are still working their way through the economy and are likely to push inflation lower. At the same time, though, he said the economy has shown surprising resilience and suggested the U.S. might be able to avoid a recession. “I now see a higher probabilit …

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