MNI: Fed's Bowman Still Open To Hikes If Inflation Stays High
Governor Michelle Bowman lists upside risks to inflation but said her baseline outlook has inflation declining.
Federal Reserve Governor Michelle Bowman said Friday she still supports raising interest rates should data indicate progress on inflation has stalled or is insufficient to bring inflation down to 2% in a timely way.
"While the current stance of monetary policy appears to be at a restrictive level, I remain willing to raise the federal funds rate at a future meeting should the incoming data indicate that progress on inflation has stalled or reversed," she said in remarks prepared for the Massachusetts Bankers Association.
Her baseline outlook continues to include inflation declining further with the policy rate held steady, but she sees a number of upside inflation risks.
"It is important to note that monetary policy is not on a preset course," she said, without explicitly mentioning rate cuts. (See: MNI INTERVIEW: Risk Next Fed Move Is A Rate Increase - English)
ELEVATED FOR SOME TIME
"With annualized three-month core PCE inflation jumping to 4.4% in March, well above average inflation in the second half of last year, I expect inflation to remain elevated for some time," she said. "The recent pickup seems to be evident across many goods and services categories, suggesting that inflation was temporarily lower in the latter half of last year."
Much of the progress on inflation last year was due to supply-side improvements, including easing of supply chain constraints, increases in the number of available workers, and lower energy prices, she said, also pointing to upside risks from geopolitics, still-elevated wage growth, strong consumer demand, and immigration. "It is unclear whether further supply-side improvements will continue to lower inflation."
There is also the risk that the loosening in financial conditions since late last year and "additional fiscal stimulus could add momentum to demand, stalling any further progress or even causing inflation to reaccelerate," Bowman said. (See: MNI INTERVIEW: Kaplan Says Loose Fiscal Is Holding Up Fed Cut)