Fed’s Barr signals rates to hold steady amid inflation concerns

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Fed’s Barr signals rates to hold steady amid inflation concerns

Vlad Schepkov

Wed, February 18, 2026 at 3:26 AM GMT+9 2 min read

Investing.com – Federal Reserve Governor Michael Barr indicated Tuesday that the central bank is likely to keep interest rates unchanged “for some time” as officials monitor inflation risks and economic data.

Speaking at the New York Association for Business Economics, Barr emphasized caution in the Fed’s approach to monetary policy. “The prudent course for monetary policy right now is to take the time necessary to assess conditions as they evolve,” he said.

Barr noted he wants to see “evidence that goods price inflation is sustainably retreating before considering reducing the policy rate further, provided labor market conditions remain stable.”

The Fed cut its overnight interest rate target range by 0.75 percentage points last year to between 3.5% and 3.75%, aiming to support the job market while maintaining enough restraint to lower inflation. Officials left rates unchanged at their January meeting.

Inflation concerns remain at the forefront of Fed policy considerations. “There are many reasons to be concerned that inflation will remain elevated,” Barr said. “I see the risk of persistent inflation above our 2% target as significant, which means we need to remain vigilant.”

Barr pointed to President Trump’s tariffs as a factor that has disrupted the downward trend in inflation.

On the labor market, Barr described conditions as stabilized but in a “delicate balance” that could be “especially vulnerable to negative shocks.”

Regarding artificial intelligence, Barr said AI adoption is currently leading to worker reallocation within firms rather than layoffs. However, he cautioned that “we should be prepared for the possibility that there might be serious short-term disruptions in the labor market.”

While Barr expects AI to boost productivity and living standards in the long run, he stated that “the AI boom is unlikely to be a reason for lowering policy rates.”

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