Federal Reserve Governor Michelle Bowman attends a “Fed Listens” event at the Federal Reserve’s headquarters in Washington, DC on October 4, 2019.
Eric Baradat | AFP | Getty Images
Federal Reserve Governor Michelle Bowman said Friday that it was possible that interest rates would need to be raised higher to curb inflation, rather than the cuts that her counterparts have said are likely and that the Expect market.
Bowman pointed to a number of potential upside risks to inflation and said policymakers need to be careful not to ease policy too quickly.
“While this is not my fundamental outlook, I continue to see the risk that if progress on inflation stalls or even reverses, we may need to raise the policy rate further at a future meeting,” she said in prepared remarks for a speech to a group of Fed observers in New York. “Reducing our key interest rate too early or too quickly could lead to a rise in inflation and require further future rate increases to bring inflation back to 2 percent over the longer term.”
As a member of the Board of Governors, Bowman is a permanent voting member of the Federal Open Market Committee, which sets interest rates. Since taking office in late 2018, her public speeches have tended to put her on the more aggressive side of the FOMC, meaning she advocates a more aggressive stance on containing inflation.
Bowman said her most likely outcome remains that “at some point it will be appropriate to cut rates,” although she noted that “we are not yet at the point” of a cut as “I continue to see a number of upside risks to inflation.” see.”
The speech to the Shadow Open Market Committee comes as markets become nervous about the near-term future of Fed policy. Remarks from several officials, including Chairman Jerome Powell, this week suggested a cautious approach to cutting interest rates. Atlanta Fed President Raphael Bostic, a FOMC voter, told CNBC that he likely expects only one rate cut this year, and Minneapolis Fed President Neel Kashkari suggested no rate cuts could occur, if inflation does not slow down further.
Futures traders are expecting three cuts this year, although it will be very tight between June and July as to when they will begin. FOMC members in March also planned three cuts this year, although an unidentified official in the “dot plot” indicated no cuts through 2026 and there were otherwise significant differences over how aggressively the central bank would proceed.
“Given the risks and uncertainties surrounding my economic outlook, I will continue to closely monitor the data as I assess the appropriate stance of monetary policy, and I will remain cautious in my approach to considering future changes in policy stance,” Bowman said.
Weighing inflation risks, she said improvements on the supply side that contributed to a decline in numbers this year may not have the same impact in the future. Additionally, she cited geopolitical risks and fiscal stimulus as other upside risks, along with stubbornly higher housing prices and labor market tightness.
“Inflation readings over the past two months suggest progress could be uneven or slower going forward, particularly in core services,” Bowman said.
Fed officials will take their next look at inflation data on Wednesday when the Labor Department releases the March consumer price index report.
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2024-04-05 18:10:49
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