Federal Reserve Bank governor Michelle Bowman makes her first public comments as a federal policymaker at an American Bankers Association conference in San Diego, Calif., Feb. 11, 2019.
Ann Sapphire | Reuters
Federal Reserve Governor Michelle Bowman said on Saturday that she supports the central bank’s recent major rate hikes and thinks they will likely continue until inflation is subdued.
The Fed raised lending rates by 0.75 percentage point in its last two policy meetings, the largest increase since 1994. Those measures were designed to bring inflation back to its highest level in more than 40 years.
In addition to the increases, the rate-setting Federal Open Market Committee indicated that “continued increases … will be appropriate,” a position Bowman endorses.
“My view is that increases of similar magnitude should be on the table until we see inflation fall in a consistent, meaningful and sustainable manner,” she added in prepared remarks in Colorado for the Kansas Bankers Association.
Bowman’s comments are the first from a board member since the FOMC approved the latest rate hike last week. In the past week, multiple regional presidents have said they also expect rates to continue rising aggressively until inflation falls from its current 9.1% yoy.
After Friday’s jobs report, which added 528,000 jobs in July and workers paid 5.2% more year-over-year, both higher than expected, markets were counting on a 68% chance of a third consecutive 0.75 percentage point move. into the next FOMC meeting. in September, according to data from the CME Group.
Bowman said she will keep a close eye on upcoming inflation data to gauge exactly how much she thinks rates need to be increased. However, she said the recent data cast doubt on hopes that inflation has peaked.
“I’ve seen little or no concrete evidence to support this expectation, and I’ll need to see unequivocal evidence of this decline before including an easing of inflationary pressures in my outlook,” she said.
In addition, Bowman said she sees “significant risk of high inflation into next year for necessities such as food, housing, fuel and vehicles.”
Her comments follow other data showing that US economic growth, measured by GDP, has contracted for two consecutive quarters, meeting a general definition of recession. While she said she expects a rebound in growth in the second half and “moderate growth in 2023,” inflation remains the biggest threat.
“The greater threat to the strong labor market is excessive inflation, which, if sustained, could lead to further economic weakening, with the risk of a prolonged period of economic weakness coupled with high inflation, as we witnessed in the 1970s. In any case, we have to keep our promise to lower inflation, and I will remain steadfastly focused on this task,” Bowman said.