MNI: Bowman Says Fed Has A Lot More Work To Do

The Federal Reserve should keep hiking interest rates and while there has been a recent decline in some inflation measures there's a lot more work to do, Governor Michelle Bowman said Tuesday.

"I expect the FOMC will continue raising interest rates to tighten monetary policy, as we stated after our December meeting," she said. "My views on the appropriate size of future rate increases and on the ultimate level of the federal funds rate will continue to be guided by the incoming data and its implications for the outlook for inflation and economic activity."

The Fed has hiked its policy rate 425bps since last March and markets see a roughly 80% chance of another stepdown in February to a 25bp increase according to CME FedWatch. CPI figures due Thursday are expected to show core inflation easing to 5.7% and headline prices at 6.6% on the year.

FOR SOME TIME

"I will be looking for compelling signs that inflation has peaked and for more consistent indications that inflation is on a downward path, in determining both the appropriate size of future rate increases and the level at which the federal funds rate is sufficiently restrictive," she said, also noting the job market has remained resilient despite higher interest rates and slower growth.

"Once we achieve a sufficiently restrictive federal funds rate, it will need to remain at that level for some time in order to restore price stability, which will in turn help to create conditions that support a sustainably strong labor market," she said pointing to lessons from the 70s and 80s about not prematurely easing. (See: MNI INTERVIEW-Fed Rates To Peak Well Above 5%, No Cuts in 2023)

"This is an important lesson that guides my thinking about monetary policy and my continued support for policy actions that will continue to lower inflation," Bowman said in unscheduled remarks at an event for Florida bankers.