Fed Governor Bowman sees “same size” rate hikes in the future after moves of three-quarters of a point
Federal Reserve Governor Michelle Bowman gives her first public remarks as a federal policymaker at the American Bankers Association conference in San Diego, California, February 11, 2019.
Ann Safir | Reuters
Federal Reserve Governor Michael Bowman said on Saturday she supports the central bank’s recent large interest rate increases and believes they are likely to continue until inflation eases.
The Fed, in its last two policy meetings, raised benchmark borrowing rates by 0.75 percentage points, the largest increase since 1994. These moves were aimed at curbing inflation, which had reached its highest level in more than 40 years.
In addition to the hikes, the rate-setting Federal Open Market Committee has indicated that “continued increases…would be appropriate,” a view that Bowman said she supports.
“My view is that increases of similar size should be on the table in order to see inflation decrease in a consistent, meaningful and lasting way,” she added in prepared notes in Colorado for the Kansas Bankers Association.
Bowman’s comments are the first by a member of the Board of Governors since the Federal Open Market Committee approved the latest rate hike last week. Over the past week, several regional heads said they also expect rates to continue rising aggressively until inflation eases from its current annual rate of 9.1%.
After Friday’s jobs report, which showed 528,000 jobs added in July and workers’ salaries increased 5.2% year-on-year, both higher than expected, markets were pricing in 68% for their third straight move of 0.75 percentage points at the Federal Market Committee meeting. next open. In September, according to data from the CME Group.
Bowman said she will closely monitor upcoming inflation data to gauge exactly how much she thinks rates should increase. However, she said, recent data cast doubt on hopes that inflation has peaked.
“I have seen few, if any, concrete indications that support this prediction, and I will need to see unequivocal evidence of this decline before I include easing inflation pressures in my forecasts,” she said.
Moreover, Bowman said she sees “a significant risk of higher inflation in the coming year on necessities including food, housing, fuel and vehicles.”
Her comments follow other data showing that US economic growth, as measured by gross domestic product, has contracted for two consecutive quarters, meeting the common definition of recession. And while it said it expects a rebound in growth in the second half and “moderate growth in 2023,” inflation remains the biggest threat.
“The biggest threat to a strong labor market is hyperinflation, which if allowed to continue could lead to further economic downturn, threatening a prolonged period of economic weakness coupled with high inflation, as we saw in the 1970s. In any case, we must live up to our commitment By lowering inflation, I will remain steadfastly focused on this task.”