Fed Governor Michael Barr reiterated a caution he raised last week: with the economy running strong, getting prices under control is front and center for policymakers. In prepared remarks in Detroit, he said, "In my base case, further policy adjustments are likely to be needed to ensure inflation comes down to target in a timely fashion." He also noted that inflation is still not close enough to the 2% goal, adding, "I don't yet see a clear trend toward a timely return to 2%."
Barr described the expansion as solid and said he anticipates growth to quicken later this year, supported by low unemployment. As he put it, "While inflation is significantly above the FOMC's goal, strong business investment and resilient spending by consumers is supporting a solid labor market."
This month's unanimous decision lifted the policy rate to 3.75% to 4%. After that move, the Fed's new projections showed, at the median, one more increase by year end. Markets are aligned with that view, with federal funds futures pointing to a likely October hike and the chance of another in December.
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Rates are higher and inflation is still sticky - that combo ripples through everything from bond yields to savings rates to rate sensitive parts of your portfolio. If you are weighing where to park cash or how much interest risk you want to carry, this is the environment you are navigating.
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