Fed Governor Barr Signals More Rate Hikes as Markets Price 73% Odds of October Move

Federal Reserve Governor Michael Barr said on September 23 that "further policy adjustments are likely to be needed to ensure inflation comes down to target in a timely fashion," in remarks prepared for a housing conference in Chicago . Barr said inflation is above the Fed's 2% target and "not clearly trending toward target," and that risks to the inflation goal have increased while risks to the labor market have receded. He supported the Fed's rate hike last week, describing the central bank as out of position after a series of shocks including tariffs, conflict in the Middle East and the AI investment boom.

Markets moved quickly. The odds of a hike when the Federal Open Market Committee meets on Oct. 27-28 jumped to 73%, according to CME FedWatch, and the 2-year Treasury yield climbed more than 13 basis points to 4.9% . The same day, S&P Global's flash business survey showed its inflation measure at the highest level since October 2022, which reinforced the hawkish read . Note that this is a survey of business prices, not an official consumer price index release.

Not everyone expects the Fed to act in October. Commentary on X highlighted a split: some market watchers tracked the rising probability, while others argued Wall Street still leaned toward a hold because the October meeting falls just ahead of the midterm elections . Others warned that further hikes would worsen the government's interest-expense burden .

What to watch: upcoming inflation data, remarks from other Fed officials before the blackout period, and whether futures pricing holds near 73% into the meeting.