Fed official says further rate hikes likely be needed

Federal Reserve headquarters

Federal Reserve Governor Michael Barr said the US central bank took an important step last week to recalibrate short-term borrowing costs, suggesting that more than one additional rate hike may be necessary.
 

In prepared remarks for a Federal Reserve conference in Chicago on Wednesday, Barr said the risks of failing to achieve the inflation target have increased, while risks surrounding the labor market have eased.
 

He noted that the US economy is growing strongly and the labor market remains resilient, but inflation is still above the Federal Reserve’s 2% target and is not clearly trending downward.
 

Barr said two additional rate hikes, or at least two, may potentially be needed, although he did not specify when they might take place.
 

What does this mean? His remarks point to a potentially longer tightening cycle than markets had expected. Market concerns were reflected clearly in the reaction across financial markets, with bond yields rising sharply while stocks and gold prices declined.