Federal Reserve Bank Governor Michelle Bowman delivers her first public address as a federal policymaker at an American Bankers Association conference in San Diego, California, February 11, 2019.
Anne Sapphire | Reuters
Federal Reserve Governor Michelle Bowman said on Saturday she supported the central bank’s recent large interest rate hikes and believed they would continue until inflation was brought under control.
The Fed, at its last two policy meetings, raised benchmark borrowing rates by 0.75 percentage points, the largest increase since 1994. The moves were aimed at containing inflation at its highest level in addition 40 years old.
In addition to the hikes, the Federal Open Market Committee responsible for setting rates has indicated that “continued increases … will be appropriate,” a view Bowman said she agrees with.
“My view is that increases of a similar size should be on the table until we see inflation come down consistently, significantly and sustainably,” she added in prepared remarks in Colorado for the Kansas Bankers Association.
Bowman’s comments are the first from a member of the Board of Governors since the FOMC last week approved the latest rate hike. Over the past week, several regional presidents have said they also expect rates to continue to rise aggressively until inflation falls from its current annual rate of 9, 1%.
After Friday’s jobs report, which showed an addition of 528,000 jobs in July and workers’ wages rising 5.2% year-over-year, both higher than expected, the Markets were pricing in a 68% chance of a third consecutive 0.75 percentage point move at the next FOMC meeting. in September, according to data from the CME Group.
Bowman said she will be watching upcoming inflation data closely to gauge precisely how much she thinks rates should be raised. However, she said recent data cast doubt on hopes that inflation has peaked.
“I have seen little, if any, concrete evidence to support this expectation, and I will need to see unambiguous evidence of this decline before factoring an easing of inflationary pressures into my outlook,” she said.
Additionally, Bowman said she sees “significant risk of high inflation next year for basic necessities, including food, shelter, fuel and vehicles.”
His comments follow other data showing that U.S. economic growth as measured by GDP has contracted for two consecutive quarters, meeting a common definition of a recession. While she said she expects growth to pick up in the second half of the year and “moderate growth in 2023”, inflation remains the biggest threat.
“The greatest threat to the strength of the labor market is excessive inflation, which if continued could lead to a further economic slowdown, risking a prolonged period of economic weakness coupled with high inflation, as we have known in the 1970s. In any case, we must fulfill our commitment to reduce inflation, and I will remain resolutely focused on this task,” Bowman said.