Fed's Barkin: Still an "open question" if rate hike will be needed

Barkin explained that much of the current elevated inflation stems from shocks, such as higher tariffs, oil prices, and demand for resources related to the artificial intelligence buildout, which he expects to subside. He suggested that the current level of interest rates may already be restrictive enough to bring inflation down.

However, Barkin also acknowledged concerns that inflation could be more embedded, citing potential ongoing supply chain issues and the possibility that AI investment will continue to drive prices higher. He pointed out that inflation's persistence above target since 2021 risks an upward shift in price expectations among firms and consumers, which could necessitate a rate increase.

Separately, Cleveland Federal Reserve Bank President Beth Hammack reiterated her view that the U.S. central bank should raise rates immediately to bring down too-high inflation and restrain business growth and investment. Hammack noted that businesses are eager to borrow and invest, but too much growth could pressure prices higher, necessitating policy restraint to return inflation to the 2% objective from its current above-3% level.

Following recent economic data, investors anticipate the Federal Reserve will maintain current interest rates at its September policy meeting, with potential hikes considered for October or December.