Federal Reserve Bank Governor Michelle Bowman makes her first public remarks as federal policymaker 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 interest rate hikes and believes they are likely to continue until inflation is subdued.
The Fed, at its last two policy meetings, raised benchmark borrowing rates by 0.75 percentage points, the largest increase since 1994. These moves were aimed at controlling inflation at its highest level high in more than 40 years.
In addition to the rate hikes, the Federal Open Market Committee indicated that “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 in a consistent, meaningful and lasting way,” he added in prepared remarks in Colorado for the Bankers Association from Kansas
Bowman’s comments are the first by a member of the Board of Governors since the FOMC approved its latest rate hike last week. 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’ pay rose 5.2% year-over-year, both higher than expected, markets had a 68% chance of a third consecutive move of 0.75 percentage points at the next FOMC meeting. in September, according to CME group data.
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 had peaked.
“I have seen little, if any, concrete evidence to support this expectation, and I will need to see unequivocal evidence of this decline before incorporating a decline in inflationary pressures into my outlook,” he said.
In addition, Bowman said he sees “significant risk of high inflation next year for necessities such as food, housing, fuel and vehicles.”
His comments come after other data showing that US economic growth as measured by GDP contracted for two straight quarters, meeting a common definition of a recession. While he said he expects a pick-up in growth in the second half and “moderate growth in 2023”, inflation remains the main threat.
“The biggest threat to the strong labor market is excessive inflation, which if allowed to continue could lead to further economic easing, with the risk of a prolonged period of economic weakness alongside high inflation, as we have experienced in the 1970s. In any case, I must deliver on our commitment to reduce inflation, and I will remain firmly focused on that task,” Bowman said.