Federal Reserve Governor Michael Barr said that if inflation fails to moderate sufficiently, the central bank should act decisively to raise rates at or after the September 15-16 FOMC meeting. His comments, which drove market odds of a hike to 66% from just above 30% before Chair Kevin Warsh’s Jackson Hole speech on August 28, have rattled equity markets at the start of September. In prepared remarks for the Second Chance Lending Forum, Barr highlighted that inflation remains too high and has been for over five years, with progress from a peak above 7% in 2022 stalling in 2025 due to tariff pass-through, Middle East conflict-driven energy costs, and rapid AI investment buildout. The Fed’s preferred PCE price index stood at 3.7% year-over-year in July 2026, while core PCE rose 3.3% annually, the highest since 2023. He gave the broader economy relatively good marks, citing resilient consumer spending, a stable job market with relatively low unemployment, and strength from artificial intelligence investment. Barr left open the possibility of taking more time if data shows inflation moderating toward 2%, but stressed the need for decisive action otherwise. His stance aligns with Warsh’s warning that policymakers must see underlying inflation moving clearly and at sufficient speed or else have work to do. The comments prompted Barclays to now expect two 25-basis-point rate hikes this year, one in September and one in December. Markets reacted with S&P 500 futures down 0.61% and Nasdaq futures down 1.20%. Key data releases including JOLTS, ADP, and nonfarm payrolls are scheduled before the meeting, which could influence rate expectations.