Michael S. Barr, Governor on the Federal Reserve Board and a voting member of the Federal Open Market Committee (FOMC) in 2026 through his permanent Board of Governors seat, told Detroit radio station WJR that inflation has knocked the Fed off course from its 2% goal.

He sees no clear trend toward a timely return to 2% unless policy changes, and he called inflation a key concern. He tied that to what households feel, saying people are frustrated and uncertain because inflation has been too high. He called the last hike appropriate and said the base case is that further policy adjustments will be needed. Risks to the inflation target have grown, he added, while risks to the labor market have receded.

On growth, Barr sounded upbeat. He called the economy quite strong, said its resilience is striking, and expects GDP growth to pick up a bit in the second half from a 2% pace in the first. The labor market is solid, he said, supported by business investment and consumer spending, though he flagged elevated wage rates in the skilled trades.

AI complicates the picture. In the short term, he said, its biggest effect is driving up costs, and he warned that the country should prepare for serious short-term disruptions in the labor market. He stays optimistic that AI will lift productivity over the longer term.

Key Quotes:

Inflation

  • I do not see a clear trend toward a timely return to 2% inflation.

  • Inflation is a key concern. Fed has been knocked off course to 2% goal.

  • I see us not getting to the 2% inflation target in a timely way unless we adjust our policy.

  • People are frustrated and uncertain because inflation has been too high.

Monetary Policy

  • There is a need to recalibrate policy. Base case is that further policy adjustments likely to be needed.

  • Last hike was appropriate, and I think we will likely need further adjustments.

  • Risks to achieving inflation target have increased, risks to labor market have receded.

  • All we're focused on is what the data tell us about the evolving outlook and balance of risks to achieving our congressional mandate.

  • Taking the longer view, we need to be sure we do what it takes to bring supply and demand into balance.

Labor Market

  • Labor market solid, supported by business investment and consumer spending.

  • Seeing some elevated wage rates in the skilled trades.

Growth & Economy

  • Economy is quite strong right now.

  • The resilience of the US economy is striking.

  • I expect GDP growth to pick up a bit in second half of year, from 2% pace in first half.

  • Momentum seems to be building in the economy.

AI & Productivity

  • In the short term, the biggest effect of AI right now is driving up costs.

  • We should be prepared for serious short-term disruptions in the labor market from AI.

  • AI buildout likely to be a strong boost to US economic activity in next year or so.

  • I am optimistic that AI will boost productivity in the longer term.

  • Broad productivity gains from AI may take some time.

  • It makes sense to pencil in AI productivity boost in medium term, but difficult to project how or when.

  • Too early to know if AI will push up neutral rate of interest.