More Interest Rate Increases Are Needed to Tame Inflation, Fed’s Bowman Says
2023.06.22 11:45
© Bloomberg. Michelle Bowman, governor of the US Federal Reserve.
(Bloomberg) — Federal Reserve Governor Michelle Bowman said the US central bank needs to raise interest rates further to bring down inflation, adding her voice to the policymakers who want to resume hiking after taking a break from their tightening campaign last week.
“I supported the FOMC’s decision last week to hold the federal funds rate target range steady and to continue to reduce the Fed’s securities holdings,” Bowman said Thursday, referring to the Federal Open Market Committee. “However, I believe that additional policy-rate increases will be necessary to bring inflation down to our target over time,” she said in remarks prepared for a Fed Listens event in Cleveland.
The governor reinforced the message delivered on Capitol Hill this week by Chair Jerome Powell, who is set to testify before a Senate banking panel at 10 a.m. on Thursday. Speaking to a House finance committee on Wednesday, he said policymakers expect interest rates will need to move higher to reduce US growth and contain price pressures.
Read More: Powell Defies Critics and Makes Case for Why Rates Must Rise
Fed officials held rates steady last week after 10 straight increases, giving themselves more time to evaluate how the economy is responding to recent banking stress and higher borrowing costs.
The move left the Fed’s benchmark rate steady in a range of 5% to 5.25%. But fresh economic projections released at the meeting show policymakers see interest rates rising by another 50 basis points this year, according to the median forecast.
Officials are starting to become more divided over the best course to take to cool inflation, which is abating but is still running higher than the Fed’s 2% target. Atlanta Fed President Raphael Bostic said Wednesday he supports holding rates steady for the rest of this year to give inflation time to respond to previous rate increases.
Bowman said Thursday higher borrowing costs may be needed to cool down core inflation, which has been persistent.
“Although tighter monetary policy has had some effect on economic activity and inflation to date, we have seen core inflation essentially plateau since the fall of 2022,” she said. “I expect that we will need to increase the federal funds rate further to achieve a sufficiently restrictive stance of monetary policy to meaningfully and durably bring inflation down.”
©2023 Bloomberg L.P.
