Fed Governor Bowman says additional rate hike could be needed if inflation stays high

Federal
Reserve
Governor
Michelle
Bowman
said
Friday
that
it’s
possible
interest
rates
may
have
to
move
higher
to
control
inflation,
rather
than
the
cuts
her
fellow
officials
have
indicated
are
likely
and
that
the
market
is
expecting.

Noting
a
number
of
potential
upside
risks
to
inflation,
Bowman
said
policymakers
need
to
be
careful
not
to
ease
policy
too
quickly.

“While
it
is
not
my
baseline
outlook,
I
continue
to
see
the
risk
that
at
a
future
meeting
we
may
need
to
increase
the
policy
rate
further
should
progress
on
inflation
stall
or
even
reverse,”
she
said
in
prepared
remarks
for
a
speech
to
a
group
of
Fed
watchers
in
New
York. “Reducing
our
policy
rate
too
soon
or
too
quickly
could
result
in
a
rebound
in
inflation,
requiring
further
future
policy
rate
increases
to
return
inflation
to
2
percent
over
the
longer
run.”

As
a
member
of
the
Board
of
Governors,
Bowman
is
a
permanent
voting
member
of
the
rate-setting
Federal
Open
Market
Committee.
Since
taking
office
in
late
2018,
her
public
speeches
have
put
her
on
the
more
hawkish
side
of
the
FOMC,
meaning
she
favors
a
more
aggressive
posture
toward
containing
inflation.

Bowman
said
her
most
likely
outcome
remains
that “it
will
eventually
become
appropriate
to
lower”
rates,
though
she
noted
that “we
are
still
not
yet
at
the
point”
of
cutting
as “I
continue
to
see
a
number
of
upside
risks
to
inflation.”

The
speech,
to
the
Shadow
Open
Market
Committee,
comes
with
markets
on
edge
about
the
near-term
future
of
Fed
policy.
Statements
this
week
from
multiple
officials,

including
Chair
Jerome
Powell,
have
indicated
a
cautious
approach
to
cutting
rates.
Atlanta
Fed
President
Raphael
Bostic,
an
FOMC
voter,

told
CNBC
he
likely
sees
just
one
reduction
this
year,
and
Minneapolis
Fed
President
Neel
Kashkari
indicated
no
cuts
could
happen
if
inflation
does
not
decelerate
further.

Futures
traders
are
pricing
in
three
cuts
this
year,
though
it
has
become
a
close
call
between
June
and
July
for
when
they
start.
FOMC
members
in
March
also
penciled
in
three
cuts
this
year,
though
one
unidentified
official
in
the “dot
plot”
indicated
no
decreases
until
2026
and
there
was
considerable
dispersion
otherwise
about
how
aggressively
the
central
bank
would
move.

“Given
the
risks
and
uncertainties
regarding
my
economic
outlook,
I
will
continue
to
watch
the
data
closely
as
I
assess
the
appropriate
path
of
monetary
policy,
and
I
will
remain
cautious
in
my
approach
to
considering
future
changes
in
the
stance
of
policy,”
Bowman
said.

Weighing
inflation
risks,
she
said
that
supply-side
improvements
that
helped
bring
numbers
down
this
year
may
not
have
the
same
impact
going
forward.
Moreover,
she
cited
geopolitical
risks
and
fiscal
stimulus
as
other
upside
hazards,
along
with
stubbornly
higher
housing
prices
and
labor
market
tightness.

“Inflation
readings
over
the
past
two
months
suggest
progress
may
be
uneven
or
slower
going
forward,
especially
for
core
services,”
Bowman
said.

Fed
officials
will
get
their
next
look
at
inflation
data
Wednesday,
when
the
Labor
Department
releases
the
March
consumer
price
index
report.