“Risks to achieving our inflation target have increased, while risks to the labour market have receded,” Barr said in prepared remarks for a Chicago Fed housing affordability conference.
He noted that US economic growth remains strong and the labour market solid, but inflation is still above the Fed’s 2% goal and not clearly headed lower. “In my base case, further policy adjustments are likely needed to ensure inflation comes down to target in a timely fashion,” he said.
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In a unanimous decision last week, Fed policymakers raised the central bank’s policy rate to a range of 3.75%-4.00%. Sixteen of 18 officials signalled that at least one more hike would likely be needed before year-end, according to a Reuters report.
Barr’s remarks suggest he sees the case for at least two further increases, though he did not specify a timeline.
His willingness to be specific about the rate path stands in contrast to Fed Chairman Kevin Warsh, who has declined to offer any forward guidance on the matter.”In my view, given changes to the economy, we were out of position, and we made an adjustment in the right direction,” Barr added, referring to last week’s quarter-point hike. “We want to support sustainable, durable growth in support of maximum employment, and price stability is crucial to that.”
Barr’s comments on monetary policy were brief, with most of his speech devoted to housing affordability, a problem he said has been compounded by a shortage of supply and elevated mortgage rates. The average rate on a 30-year fixed-rate mortgage in the US rose to 7.12% last week, its highest level in more than two years, the Mortgage Bankers Association said on Wednesday.
(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)
