Barr argues for further hikes one week after the Fed's first increase in three years

Twelve of the members who see a higher benchmark by year end put the move at a single quarter point, and four put it at half a point, the equivalent of two increases ^[5]. Average the sixteen projections and you get 31.25 basis points of further tightening ^[15]. From the current 3.75% to 4% range ^[3], that puts the top of the range near 4.31% by December ^[16]. Three quarters of the sixteen are in the one-increase camp ^[17].

The four half-point projections are the part to price. Two meetings are left this year, the next in late October ^[6], so a member projecting 50 basis points is projecting an increase at each of them ^[18]. One quarter point puts the range at 4% to 4.25%; half a point puts it at 4.25% to 4.5% ^[19].

Barr called last week's move a "needed" recalibration of policy to address persistently high inflation, and probably not sufficient to return price growth to the 2% target ^[8]. "In my view, given changes to the economy, we were out of position, and we made an adjustment in the right direction," Barr said. "In my base case, further policy adjustments are likely to be needed to ensure inflation comes down to target in a timely fashion" ^[2]. He did not say whether he would support an increase in October, in December or later ^[7].

The venue was an affordable housing event hosted by the Federal Reserve Bank of Chicago ^[9], and Barr told it that housing has become "increasingly unaffordable for many Americans for a number of years" ^[10]. He put part of the blame on the mortgage market itself. "Many families benefited from very low mortgage rates before 2022; these households are now less likely to move given the high rates they would face," he said. "This lock-in effect reduces both demand and supply and thus housing market dynamism" ^[12]. Higher policy rates widen the gap between the mortgage a household holds and the one it would have to take.

I would budget for one more quarter point by December and carry the second as a live risk, on the strength of Barr's stated base case ^[2] and sixteen projections pointing the same way ^[4]. A projection is not a vote. The unanimity that produced last week's increase ^[3] would serve an October hold just as well. An October hold, followed by December projections that walk the year-end level back to 4%, is what would settle this against tightening.