Another Fed Member Strikes a Hawkish Tone, Says He Will Support a Rate Hike If Inflation Remains Sticky

Federal Reserve Governor Michael Barr said he will support an interest rate hike if inflation doesn't ease.

Speaking at a banking forum in Washington, Barr, who votes on FOMC decisions, said he's concerned about "broader price pressures taking hold."

"If trends in the data give me some confidence that inflation is moderating on a path to 2%, then I think we can take a bit more time to assess our policy stance," Barr said. "However, if inflation appears not to be moderating sufficiently, then I think we should act decisively to raise rates."

Fed Chair Kevin Warsh also appeared to anticipate he is prepared to support a more hawkish policy if prices remain above the central bank's target.

Speaking at the Jackson Hole symposium last week, Warsh said that even though recent inflation readings have been "better than expected, they do not tell me that underlying trends have meaningfully improved." He claimed that if the trend doesn't move down in the future, the central bank will have "work to do."

However, he did not offer guidance about the central bank's next moves, speaking against "oversharing" policy deliberations.

Other officials have been calling for higher rates for longer. Kansas City Federal Reserve President Jeffrey Schmid said last week that inflation is "still stubborn and it's still sticky," and the central bank has not yet managed to "break through."

Schmidt, who does not vote on FOMC decisions, added that Fed members will "have our work cut out for us as we move into the cycle."

Cleveland Federal Reserve president Beth Hammack also said earlier this month that more than one interest rate hike could be needed. She claimed last Thursday that "now is the time" to act on the matter.

The remarks came after the central bank's preferred inflation gauge rose 0.2% in July, in line with forecasts from analysts.

Concretely, the core personal consumption expenditures price index gained 0.2% last month and clocked in at 3.3% for the year, data from the Department of Commerce showed.

The index that does not exclude more volatile components like food and energy also rose 0.2% and put the annual inflation rate at 3.7%, above analysts' expectations.

Elsewhere, the report showed that personal income rose 0.4% and spending gained 0.2%. Both figures were stronger than previous expectations.

The central bank kept rates unchanged in its July meeting, but three officials voted for a hike. The minutes released last week showed that members of the Federal Open Market Committee said they would need to hike rates unless inflation cools over the next months.

"Many participants assessed that policy tightening would likely be necessary if inflation did not decline," reads a passage of the meeting's summary.