MNI BRIEF: Fed's Bowman Still Sees Need To Raise Rates Further

Federal Reserve Governor Michelle Bowman favors raising the fed funds rate again to bring inflation back to 2%, citing continued risk that core services inflation remains "stubbornly persistent" and higher energy prices reverse some past progress on inflation, she said Tuesday.

"While I continue to expect that we will need to increase the federal funds rate further to bring inflation down to our 2% target in a timely way, I supported the FOMC’s decision last week to hold the target range for the federal funds rate at the current level as we continue to assess incoming information and its implications for the outlook," she said in remarks prepared for an Ohio Bankers League event in Columbus, Ohio.

"Some components of core services inflation have picked up, and I see a continued risk that core services inflation remains stubbornly persistent. In my view, there is also a risk that higher energy prices could reverse some of the progress made to bring overall inflation down," she said.

Current benchmark rates appear to be restrictive, and a rise in longer term bond yields since September have tightened financial conditions, but yields can be volatile, she noted. "We don’t yet know the effects of tightened financial conditions on economic activity and inflation," she said. (See: MNI: Yield Spike Cuts Chance Of Fed Dec Hike, Q1 Still In Play)

"I remain willing to support raising the federal funds rate at a future meeting should the incoming data indicate that progress on inflation has stalled or is insufficient to bring inflation to 2% in a timely way."