Federal Reserve Bank Governor Michelle Bowman delivers her first public remarks as a federal lawmaker 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 bank’s recent large interest rate hikes and believes they are likely to continue until inflation is brought under control.
The Fed, at its last two policy meetings, raised benchmark lending rates by 0.75 percentage point, the biggest increase since 1994. Those moves were aimed at reining in inflation, which is at its highest level in more 40 years old.
In addition to the increases, the rate-setting Federal Open Market Committee said “the ongoing increases … will be appropriate,” a view Bowman said he supports.
“My view is that increases of a similar size should be on the table until we see inflation decline consistently, significantly and lastingly,” he added in remarks prepared in Colorado for the Kansas Bankers Association.
Bowman’s comments are the first by a member of the Board of Governors since the FOMC approved the latest rate hike last week. Over the past week, several regional presidents have said that they also expect rates to continue to rise aggressively until inflation falls from its current annual rate of 9.1%.
Following Friday’s jobs report, which showed a 528,000 job addition in July and a 5.2% year-over-year wage increase for workers, both higher than expected, markets priced in a 68% chance of a third consecutive movement of 0.75 percentage points at the next FOMC meeting. in September, according to data from CME Group.
Bowman said he will watch upcoming inflation data closely to gauge precisely how much he thinks rates should rise. However, he said recent 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 decline before incorporating a easing of inflationary pressures into my outlook,” he said.
Additionally, Bowman said he sees “significant risk of high inflation in the coming year for necessities such as food, housing, fuel and vehicles.”
His comments come on the heels of other data showing US economic growth, as measured by GDP, contracted for two consecutive quarters, meeting a common definition of a recession. While he said he expects growth to pick up in the second half and “moderate growth in 2023,” inflation remains the biggest threat.
“The biggest threat to the strong labor market is excessive inflation, which if allowed to continue could lead to further economic weakness, with the risk of a prolonged period of economic weakness coupled with high inflation, such as we experienced in the 1970s. In any event, we must deliver on our commitment to reduce inflation, and I will remain firmly focused on this task,” Bowman said.