Fed's Michelle Bowman says more US rate hikes will likely be needed
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US inflation slowed to a 3 per cent annual rate in June, down from 9 per cent in the middle of 2022.
PHOTO: AFP
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NEW YORK – The United States Federal Reserve will likely need to raise interest rates further to bring down inflation, Fed governor Michelle Bowman said on Saturday.
Ms Bowman said she supported the Fed’s quarter-point increase in interest rates
“I also expect that additional rate increases will likely be needed to get inflation on a path down to the FOMC’s 2 per cent target,” she said in remarks prepared for delivery to the Kansas Bankers Association, using the acronym for the Federal Open Market Committee, the Fed’s rate-setting panel.
Monetary policy is not on a “preset course”, she also said, and data will drive future decisions.
“We should remain willing to raise the federal funds rate at a future meeting if the incoming data indicates that progress on inflation has stalled.”
Ms Bowman has frequently expressed views that are more hawkish than some of her colleagues.
In forecasts published in June, most Fed policymakers expected to end the year with the Fed policy rate at 5.6 per cent, one quarter-point hike above the setting established at the Fed’s late-July meeting.
Ms Bowman’s use of the plural “rate increases” in her remarks on Saturday indicates that she thinks the Fed will need to go higher than that.
After the most recent rate hike, Fed chairman Jerome Powell left the door open to another increase in September, but also signalled that cooler data could allow a pause.
US hiring slowed in June, but unemployment, at 3.5 per cent, remains low.
PHOTO: AFP
Ms Bowman noted some progress on inflation,
“The recent lower inflation reading was positive, but I will be looking for consistent evidence that inflation is on a meaningful path down towards our 2 per cent goal as I consider further rate increases and how long the federal funds rate will need to remain at a restrictive level,” she said.
“I will also be watching for signs of slowing in consumer spending and signs that labour market conditions are loosening.”
The Labour Department’s monthly job market report
Banks also continue to increase lending to households and businesses, albeit at a slower pace than when interest rates were lower, with no sharp contraction of credit since the banking turmoil in March, she said. REUTERS
