Federal Reserve Governor Michael Barr has renewed his call for further interest-rate increases to bring inflation down to 2%, while market odds of an October hike have fallen to about 50% from roughly 70%.
Summary
- October hike odds fell to about 50% after John Williams signaled patience on further increases.
- Barr said inflation risks have grown while risks to the labor market have eased.
- The Fed raised its benchmark rate to 3.75%–4% in September, with all 12 voters supporting the move.
- August PCE inflation data and September employment figures are scheduled for release this week.
Federal Reserve Governor Michael Barr said at the Detroit Economic Club on Sep. 29 that his base case calls for further policy adjustments to return inflation to target in a timely manner. With growth strong and employment holding up, he argued that policymakers need to give more weight to the risk of persistent inflation.
October Fed rate hike odds fall as Williams favors patience
Alongside Barr’s warning, New York Fed President John Williams offered a less urgent view of the next rate increase.
In his Sep. 29 remarks, Williams said one further increase remained his base case for this year, but suggested the Fed could take time to assess incoming data. Barron’s reported that CME FedWatch odds of a quarter-point October hike fell from 70.9% on Monday to 49.3% on Tuesday afternoon. The remaining policy meetings this year take place in October and December.
In its account of the speech, Reuters reported that Williams saw no urgency for the next hike, even as he remained committed to bringing inflation down. His position left room for another increase later this year without committing to action at the Oct. 27–28 meeting.
Across U.S. financial markets, Reuters reported that expectations for an October increase dropped to 51.5% during Tuesday’s session. Treasury yields also eased from their earlier highs as oil prices declined and investors assessed Williams’ comments.
The probability readings came from separate market snapshots during the day, with both reports placing October hike expectations close to an even chance.
Barr sees inflation risks outweighing employment concerns
In Detroit, Barr said risks to the inflation target had increased while risks to employment had receded, requiring a change in the balance of monetary policy.
The governor pointed to energy costs and demand linked to artificial intelligence investment as sources of price pressure. Although tariff effects may have faded, he said uncertainty over the Middle East conflict continued to cloud the energy outlook.
On the underlying inflation trend, Barr counted only two months in the past 20 with readings consistent with 2% core PCE inflation. His assessment was that the data had yet to show a clear path back to target.
“We want to support sustainable, durable growth in support of maximum employment, and price stability is crucial to that,” he said.
Barr’s published remarks state that his views are his own and do not necessarily represent the Federal Reserve Board or the full rate-setting committee.
In its report on the address, Reuters reported that Barr expected economic growth to pick up slightly in the second half of 2026 from the roughly 2% pace recorded in the first half. He also saw business investment and consumer spending supporting employment, while acknowledging uncertainty about when AI investment would deliver lasting productivity gains.
September’s Fed rate hike has lifted the benchmark to 3.75%–4%
At its Sep. 16 meeting, the Federal Open Market Committee raised the federal funds target range by 25 basis points to 3.75%–4%. The Fed’s statement recorded a unanimous 12–0 vote and described economic activity as expanding at a solid pace.
In its assessment of the U.S. economy, the committee cited resilient domestic spending, strong productivity growth and robust capital investment. The statement also said job gains had kept pace with workforce growth, while unemployment had changed little. Officials attributed the increase to their effort to restore price stability.
As crypto.news reported on Sep. 23, BitGo Research examined how Bitcoin absorbed the Fed hike and a separate Senate setback for the CLARITY Act. Research chief Greg Cipolaro argued that the two events failed to produce a lasting selloff.
In BitGo’s review, Bitcoin moved toward $75,000 after the rate decision before recovering to roughly $76,000–$76,700 within hours. The Sep. 23 report later placed Bitcoin above $86,000, with renewed ETF demand and short covering accompanying the recovery.
The same report detailed September’s Fed projections: 16 of 18 participants anticipated a year-end rate above the current range. Those individual forecasts indicated support for further tightening, but did not commit the committee to an October increase.
US inflation and jobs releases follow earlier Bitcoin reactions
Ahead of the next decision, the Bureau of Economic Analysis has scheduled August Personal Income and Outlays for Sep. 30 at 8:30 a.m. Eastern. The report includes the PCE price index, which the Fed uses for its inflation target.
The BEA’s latest published table shows annual PCE inflation at 3.7% in July, unchanged from June. Its release calendar also lists the third estimate of second-quarter GDP for Sep. 30.
Earlier in September, the Sep. 5 report on Bitcoin’s jobs-driven price decline recorded the asset below $80,000 after U.S. employers added 162,000 jobs in August. Unemployment held at 4.1%, while Reuters figures cited in that coverage showed September hike expectations rising from 52% to 61% after the employment release.
On Sep. 11, coverage of Bitcoin’s post-CPI price rebound recorded a recovery above $78,000 after August consumer inflation reached 3.4% annually. According to the BLS figures cited there, gasoline prices rose 3.9% during the month and accounted for more than one-third of the headline CPI increase.
Excluding food and energy, monthly inflation reached 0.3%, above the cited 0.2% forecast. The Sep. 11 report also recorded annual core CPI inflation slowing from 2.5% in July to 2.4% in August.
The Bureau of Labor Statistics has scheduled the September Employment Situation report for Friday, Oct. 2, at 8:30 a.m. Eastern.