Fed's Barr Signals More Rate Hikes as US Composite PMI Hits 62-Month High of 58.4

Federal Reserve Governor Michael Barr said Wednesday that additional interest rate increases will likely be necessary to return inflation to the Fed's 2% target, after the central bank raised its benchmark rate for the first time in three years. Barr called the quarter-point move an "important action" and said the committee had been "out of position" on rates. The Fed raised its policy rate to a target range of 3.75%-4%. Of 18 participants submitting projections, 16 indicated at least one more hike before year-end, though Barr's language points to a minimum of two. His remarks came as S&P Global's flash composite PMI hit 58.4 in September, a 62-month high, up from 56.0 in August. The services gauge reached 58.7; manufacturing hit 57.0. Input costs rose at their steepest pace since October 2022 on fuel, freight and wage pressures. Markets priced a 71% probability of a hike at the Oct. 27-28 FOMC meeting. The 2-year Treasury yield jumped more than 13 basis points to 4.9%. Boston Fed's Susan Collins and St. Louis Fed's Alberto Musalem also backed further tightening this week.