MNI: Bowman Supports Steady Fed Stance, Warns of Upside Risks
Fed Governor expects inflation to remain elevated for some time.
Federal Reserve Governor Michelle Bowman Friday reiterated her preference for keeping interest rates steady to allow restrictive policy to bring inflation down, adding she remains open to raising borrowing costs should data indicate progress on inflation has stalled.
"With average core consumer price index (CPI) inflation this year through April running at an annualized rate of 4.3%, well above average inflation in the second half of last year, I expect inflation to remain elevated for some time," she said in prepared remarks to the Pennsylvania Bankers Association.
Bowman reaffirmed her baseline outlook is for inflation to decline further with the policy rate held steady, but she sees a number of upside inflation risks on the horizon. (See: MNI INTERVIEW: CPI Keeps Fed On Track For '24 Cuts-Ireland)
RESTRICITIVE POLICY
"At its current setting, our monetary policy stance appears to be restrictive, and I will continue to monitor the incoming data to assess whether monetary policy is sufficiently restrictive to bring inflation down to our target," she said.
It is unclear whether further supply-side improvements will continue to lower inflation, while geopolitical developments could also pose upside risks to inflation, she said. Bowman also flagged the possibility that looser financial conditions could add momentum to demand, she said.
"While the current stance of monetary policy appears to be at a restrictive level, I remain willing to raise the target range for the federal funds rate at a future meeting should the incoming data indicate that progress on inflation has stalled or reversed," Bowman said.