MNI: Fed's Bowman Sees Risk of More Hikes Amid Sticky Prices

Recent economic data have not provided evidence that inflation is on a clear downward path and the Federal Reserve may need to tighten monetary policy further, Fed Governor Michelle Bowman said Friday, in a speech that warned against a knee-jerk toughening of bank capital requirements and supervision.

"In my view, the most recent CPI and employment reports have not provided consistent evidence that inflation is on a downward path, and I will continue to closely monitor the incoming data as I consider the appropriate stance of monetary policy going into our June meeting," Bowman said in prepared remarks.

"Should inflation remain high and the labor market remain tight, additional monetary policy tightening will likely be appropriate to attain a sufficiently restrictive stance of monetary policy to lower inflation over time," she said. "I also expect that our policy rate will need to remain sufficiently restrictive for some time to bring inflation down and create conditions that will support a sustainably strong labor market."

Inflation remains much too high, and measures of core inflation have remained persistently elevated, with declining unemployment and ongoing wage growth, she said in an unscheduled speech on banking to be given at an ECB event.

The Fed last week raised rates to a range of 5% to 5.25% and continued quantitative tightening. That policy stance is now restrictive, she said, but whether it is sufficiently restrictive to bring inflation down remains uncertain.

(See: MNI INTERVIEW: Sticky Prices Could Require More Hikes-Fed Econ)

TARGETED REFORMS

Bowman, a former bank commissioner from Kansas and the chair of the Fed Board's subcommittee on smaller regional and community banking, argued for targeted changes to the bank regulatory framework after recent U.S. bank failures.

"I have heard the drumbeat calling for broad, fundamental reforms for the past several years, shifting away from tailoring and risk-based supervision," she said. "I believe this is the wrong direction for any conversation about banking reform."