The Fed’s Bowman says there’s “much more work to be completed” to carry inflation down

Federal Reserve Governor Michelle Bowman delivers her first public remarks as a federal politician at an American Bankers Association conference in San Diego, California February 11, 2019.

Ann Sapphire | Reuters

Federal Reserve Governor Michelle Bowman said Tuesday she expects more rate hikes, with higher rates prevailing for a while until inflation is contained.

“I am committed to taking further action to bring inflation back on target,” the central bank official said in a remark prepared for a speech in Florida. “In the past few months we’ve seen some inflation measures fall, but we still have a lot of work to do, so I expect that to happen [Federal Open Market Committee] will continue to raise interest rates to tighten monetary policy.”

The FOMC has hiked the Fed’s benchmark interest rate seven times since March 2022, by a total of 4.25 percentage points.

Last week, minutes from the committee’s December meeting indicated that most members agreed to more rate hikes in 2023, which would likely take the fed funds rate slightly above 5%.

Mirroring the consensus at that meeting, Bowman said she sees interest rates rising until there are “convincing signs that inflation has peaked and more consistent signs that inflation is on a downward path” before she said restrictive monetary policy loosens.

“My expectation is that once we have achieved a sufficiently restrictive policy rate, it will need to remain at that level for some time to restore price stability, which in turn will help create conditions that support a sustainably strong labor market,” said she said.

Policy will be guided by incoming economic data to provide clues on how Fed policy is affecting growth, she added.

Bowman spoke on the same day as Fed Chair Jerome Powell addressed the Fed’s Swedish counterpart, the Riksbank. In that speech, Powell emphasized the need for the Fed to remain independent of political influence as it crafts policies aimed at achieving price stability.

Bowman drew on past experience, citing the mistakes the Fed made in the 1970s when it raised rates to counter inflation but then lowered them when the economy slowed. She said she understands the Fed’s policies could slow the economy, and particularly the job market, but insisted doing nothing carries higher costs.

“It’s important to keep in mind that there are costs and risks to tightening policies to bring down inflation, but I see the costs and risks of inflation continuing to be far greater,” she said.

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