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Markets Raise Bets On October Fed Rate Hike

Barr said policymakers likely need additional adjustments to bring inflation back toward the Fed’s target, according to his prepared remarks at a Chicago housing conference

,   and  TIPP Staff
2 min read
Fed Governor Michael Barr (Pic via X)

Markets are increasingly pricing in another Federal Reserve rate hike in October after Fed Governor Michael Barr backed further policy tightening and fresh data showed stronger inflation pressures.

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Barr said policymakers likely need additional adjustments to bring inflation back toward the Fed’s target, according to his prepared remarks at a Chicago housing conference. He supported last week’s 25-basis-point increase, which lifted the benchmark rate to 3.75%-4%.

The outlook shifted after S&P Global reported stronger activity across manufacturing and services. Its composite index reached a more than five-year high, while its inflation measure climbed to its highest level since October 2022. Rising fuel, transportation costs and wages contributed to the increase.

Markets responded sharply. According to CME FedWatch, the probability of an October 27-28 rate hike rose to 71%. The two-year Treasury yield also jumped more than 13 basis points to 4.9%.

Regional Fed presidents Alberto Musalem and Susan Collins have also indicated support for further increases.

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