Barr says further Fed rate increases are likely; 10-year yield at 5.06%
Federal Reserve Governor Michael Barr said Wednesday, September 23, 2026 that further policy adjustments are likely needed to return inflation to 2%, a week after a 25-basis-point hike to 3.75%-4.00%.
Federal Reserve Governor Michael S. Barr told a Chicago Fed housing-affordability summit Wednesday that inflation is not clearly returning to 2% on time and that further policy tightening is likely.
“Economic growth is strong and the labor market is solid, but inflation is above our 2 percent target and not clearly trending toward target in a timely way,” Barr said in prepared remarks titled “A Long-Term View on the Costs of Shelter.” “In my base case, further policy adjustments are likely to be needed to ensure inflation comes down to target in a timely fashion.”
Last Wednesday the FOMC raised the federal-funds target range by 25 basis points to 3.75% to 4% on a 12-0 vote, a step Barr said he supported. “In my view, given changes to the economy, we were out of position, and we made an adjustment in the right direction,” he said. He added that risks to the inflation goal have increased while risks to the labor market have receded.
The Committee’s median projection for the funds rate at the end of 2026 is 4.1%, above that new range. As of 9:25 a.m. Eastern, before Barr spoke, federal-funds futures implied a 57.4% probability of another quarter-point increase at the October 27-28 meeting, to 4.00% to 4.25%. Barr did not name the next meeting.
Barr said high rents and home prices relative to incomes have made shelter increasingly unaffordable for years. He cited the Atlanta Fed’s homeownership affordability index at 68 in July, which he said was the lowest in 21 years, and said the consumer price index for rent of primary residence in August was 34% above its December 2019 level. Shelter inflation has eased from its 2022-23 pace, he said, but prices are still rising at about 2.75% a year. “Our short-term policy rates affect longer-term borrowing rates, including those for mortgages,” he said. “This combination of high prices and high rates puts homeownership out of reach for many families.”
Par yields ran from 3.97% at one month to 5.29% at 30 years
By 10:45 a.m. Eastern, the 10-year Treasury yield was at 5.064%, up 9.7 basis points on the session. The long end fell; the front end barely moved. TLT, which holds Treasuries due in 20 years or more, was down 1.15% at $80.81, while SHY, which holds 1- to 3-year Treasuries, was off 0.19%. The U.S. homebuilders fund, XHB, was down 1.65%, giving back part of Tuesday’s 2.5% gain. The S&P 500 financials fund, XLF, was up 0.33%.
S&P Global’s flash U.S. composite PMI, a survey of manufacturers and service firms, had risen to 58.4 in September, the strongest reading since July 2021, 20 minutes before Barr spoke. The two arrived in the same half-hour, and the morning’s move in the 10-year does not isolate one catalyst from the other.
The 10-year yield is above 5%, the rate backdrop for the mortgage market Barr spent the speech describing.
Frequently asked
What did Barr actually say?
He said inflation is above 2% and not clearly trending toward target in a timely way, and that in his base case further policy adjustments are likely needed.
Where is the federal funds rate now?
The FOMC raised the target range 25 basis points last Wednesday to 3.75% to 4% on a 12-0 vote, which Barr supported.
Do markets expect another hike in October?
Federal-funds futures at 9:25 a.m. Eastern implied a 57.4% probability of another quarter-point increase at the October 27-28 meeting.
Did Barr's remarks move the 10-year yield?
The 10-year was at 5.064%, up 9.7 basis points, but a flash composite PMI of 58.4 landed 20 minutes before he spoke, so the move does not isolate one catalyst.