According to APP, Federal Reserve Governor Barr explicitly stated that policymakers may need to keep interest rates stable for some time to address inflation significantly above the Fed's 2% target. "While I expect inflation to decline as the impact of tariffs on prices diminishes later this year, I would like to see evidence of a sustained decline in inflation in goods and services prices before considering further rate cuts, provided that labor market conditions remain stable." This was Barr's latest statement at the New York Association for Business Economics event on February 17th. He also reiterated his support for the Fed's decision last week to keep the benchmark policy rate unchanged and specifically emphasized the additional uncertainty brought about by the situation in the Middle East.

Barr 's remarks further reinforced the policy stance of "higher interest rates for a longer period." Currently, the Federal Reserve's target range for the federal funds rate is at 3.50%-3.75% (after a cumulative rate cut of 75 basis points by 2025), while upside risks to inflation remain. Barr specifically mentioned that rising oil prices will quickly pass to gasoline prices, putting direct pressure on the cost of living for low- and middle-income families, a factor that policymakers must consider. Given a relatively stable labor market, the Federal Reserve needs more clear signals of a sustained decline in the prices of goods and services before considering further easing.

From a market expectation perspective, the latest data from professional market pricing tools indicates that the probability of a policy shift has narrowed significantly. Below is a comparison of the latest probabilities for the April and June meetings:

Compared to the market's previous expectation of a higher probability of interest rate hikes, current data reflects a significant cooling of investor expectations for a sharp short-term adjustment by the Federal Reserve . This change is mainly due to the stubbornness of inflation data and the combination of geopolitical uncertainties. If subsequent tariffs are implemented and push up prices, or if the situation in the Middle East further increases energy costs, the duration of high interest rates may exceed the market's initial assessment.

A deeper analysis reveals that Barr 's remarks are not an isolated signal, but rather a microcosm of the consensus within the Federal Reserve . Currently, global supply chains remain affected by tariffs, making commodity prices prone to periodic rebounds, while service prices, supported by wages and housing costs, are declining slowly. While a stable labor market is a positive factor, an unexpected slowdown could pose a "double risk" for the Fed : it must both prevent a rebound in inflation and maintain employment. This balance tests policy flexibility. For ordinary households, rising daily expenses such as gasoline will directly reduce purchasing power; for investors, a continued high- interest-rate environment may negatively impact stocks and bonds, but simultaneously support the dollar, indirectly affecting capital flows to emerging markets.
Editor's Summary <br/>Barr's latest remarks highlight the Federal Reserve 's cautious stance amid uncertainty surrounding the inflation path. Latest market probabilities indicate that while the risk of a short-term rate hike is low, the probability of rates remaining unchanged is extremely high. Middle East geopolitical factors have further increased uncertainty, and the policy direction still needs to be verified by subsequent inflation and labor data.