MNI: Fed's Bowman: 75BP Hikes On Table Until Inflation Falls

Federal Reserve Governor Michelle Bowman said Saturday there's a case for continuing 75 basis-point rate increases until inflation slows in a meaningful way and she needs "unambiguous evidence" before marking down her price forecasts.

Following the recent hike to 2.25%-2.5%, "similarly-sized increases should be on the table until we see inflation declining in a consistent, meaningful, and lasting way," Bowman told the Kansas Bankers Association. "I support continued increases until inflation is on a consistent path to significantly decline."

There have been "few, if any, concrete indications" supporting the idea that inflation now at a "concerningly high" 9.1% was going to peak earlier this year, she said. "I see a significant risk of high inflation into next year for necessities including food, housing, fuel, and vehicles," she said, and other supply issues also seem likely to persist.

Bowman added to the run of policymakers this week downplaying the risk of a recession that could lead the Fed to cut rates next year. Her outlook instead calls for quicker growth in the second half of this year and "moderate" expansion in 2023.

The July jobs report showed "continued significant growth in hiring," and she expects the labor market to remain strong even as higher interest rates could cause firms to reduce employment.

"The larger threat to the strong labor market is excessive inflation, which if allowed to continue could lead to a further economic softening, risking a prolonged period of economic weakness coupled with high inflation, like we experienced in the 1970s," she said. "In any case, we must fulfill our commitment to lowering inflation, and I will remain steadfastly focused on this task."