Federal Reserve Bank Governor Michelle Bowman makes her first public remarks as a federal policymaker at an American Bankers Association conference in San Diego, California, on February 11, 2019.
Ann Sapphire | Reuters
Federal Reserve Governor Michelle Bowman said Saturday that she supports the central bank̵[ads1]7;s recent big rate hikes and believes they are likely to continue until inflation is subdued.
The Fed, at its last two policy meetings, raised benchmark interest rates by 0.75 percentage points, the biggest increase since 1994. These moves were aimed at curbing inflation at its highest level in more than 40 years.
In addition to the increases, the rate-setting Federal Open Market Committee indicated that “ongoing increases … would be appropriate,” a view Bowman said she supports.
“My view is that similarly large increases should be on the table until we see inflation come down in a consistent, meaningful and lasting way,” she added in prepared remarks in Colorado for the Kansas Bankers Association.
Bowman’s comments are the first from a member of the board since the FOMC approved the latest rate hike last week. Over the past week, several regional presidents have said they also expect interest rates to continue to rise aggressively until inflation falls from the current 9.1% annual rate.
After Friday’s jobs report, which showed a gain of 528,000 jobs in July and workers’ wages up 5.2% year over year, both higher than expected, markets priced a 68% chance of a third move of 0.75 percentage points at the next FOMC- Meeting. in September, according to data from the CME Group.
Bowman said she will be watching upcoming inflation data closely to gauge exactly how much she thinks interest rates should be raised. However, she said the latest data cast doubt on hopes that inflation has peaked.
“I have seen few, if any, concrete indications to support this expectation, and I will need to see unequivocal evidence of this slowdown before incorporating an easing of inflationary pressures into my outlook,” she said.
Moreover, Bowman said she sees “a significant risk of high inflation into next year for essentials including food, housing, fuel and vehicles.”
Her comments come after other data showing that US economic growth as measured by GDP slowed for two consecutive quarters, meeting a common definition of a recession. While she said she expects a pick-up in second-half growth and “moderate growth in 2023”, inflation remains the biggest threat.
“The bigger threat to the strong labor market is excessive inflation, which if allowed to continue could lead to further economic softening, risking a prolonged period of economic weakness coupled with high inflation, as we experienced in the 1970s. Either way, we must meet our commitment to lower inflation, and I will remain unwaveringly focused on this task,” Bowman said.