Markets price two more Fed hikes after Barr comments
Governor Michael Barr's remarks come a week after the Federal Reserve's first rate increase since 2023.
Published · Updated
UpdateWednesday, September 23, 2026 at 4:40 PM ET
Michael Barr's title is Fed Vice Chair, not Governor as the published piece stated.
Barr holds the title of Fed Vice Chair, not Governor. Richmond Fed President Thomas Barkin said last week's quarter-point rise reflected inflation risk outweighing the risk to jobs, and that he wants the current cycle to resemble the 1990s mid-cycle adjustment rather than a prolonged tightening campaign, adding that the Fed cannot rely on markets alone to hold down inflation. Boston Fed President Susan Collins said a somewhat more restrictive policy rate would help return inflation to the 2% target, citing persistent inflation and renewed Middle East conflict as reasons for her vote. On Monday, Collins and Goolsbee said oil prices and tariffs could keep rates elevated for longer.
Traders are increasingly pricing in two further Federal Reserve rate increases after Governor Michael Barr said further tightening may be needed. The comments run against market expectations for cuts and have pushed bond yields higher.
The shift follows a split among Fed officials over last week's rate rise, the central bank's first since 2023. Council of Economic Advisers Chair Kevin Hassett has questioned that increase, while Fed Governor Austan Goolsbee said on the Economics, Applied podcast that bigger negative supply shocks reinforce the case for a hawkish stance.
The hawkish turn coincides with rising tension over the Strait of Hormuz. Iran's president said Tehran will not allow freedom of navigation through the strait while US sanctions and what he called a blockade remain in place. Iran has demanded Washington accept a safe route through the strait agreed with Oman, with the waterway to stay closed until the US agrees, and has set a four to five day deadline. The United States has rejected Iran's proposal to reopen the strait on those terms. Secretary of State Marco Rubio has called the talks positive but not a breakthrough, and has said the strait will remain open.
Barr's signal of more tightening conflicts with market hopes for lower rates and is pushing yields up, a combination that weighs on equities and growth stocks in particular. Iran's harder line on Hormuz adds geopolitical risk with no diplomatic resolution in sight, a threat to oil prices and supply chains. Together, the two forces are tightening financial conditions and raising the risk of stagflation.