MNI: Fed's Bowman Wants 'Further Rate Hikes'

Federal Reserve Governor Michelle Bowman on Friday called for "further rate hikes" to bring inflation back to target, citing too-high inflation and risk that rising energy prices could reverse past progress.

A majority of FOMC members penciled in one more hike for the year in the Summary of Economic Projections released Wednesday, but opinions are split over where the fed funds rate will settle at the end of 2024. Next year's dots range from 4.4% to 6.1% with a median of 5.1%, compared to just below 5.5% now.

"Given the mixed data releases — strong spending data but a decline in inflation and downward revisions to jobs created in previous months — I supported the FOMC’s decision to maintain the target range for the federal funds rate. But I continue to expect that further rate hikes will likely be needed to return inflation to 2% in a timely way," Bowman said in remarks prepared for the Independent Community Bankers of Colorado.

"Inflation is still too high, and I expect it will likely be appropriate for the Committee to raise rates further and hold them at a restrictive level for some time." (See: MNI INTERVIEW: Fed Will Hike Again If Inflation Lingers-Kamin)

ENERGY PRICES

Despite "considerable progress" in lowering inflation with rising interest rates, Bowman sees "continued risk" that energy prices could rise further and reverse the progress of recent months.

Meanwhile, bank lending standards have tightened without signs of a sharp contraction in credit that would significantly slow economic activity, suggesting "the effects of monetary policy on bank lending may have smaller effects on the economy than in the past."

"Progress on inflation is likely to be slow given the current level of monetary policy restraint," she said.

"We should remain willing to raise the federal funds rate at a future meeting if the incoming data indicates that progress on inflation has stalled or is too slow to bring inflation to 2% in a timely way. Returning inflation to our 2% goal is necessary to achieve a sustainably strong labor market and an economy that works for everyone."