On October 4, 2019, Federal Reserve Board Governor Michelle Bowman attended the “Federal Reserve Listening” event held at the Federal Reserve headquarters in Washington, DC.
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Federal Reserve Governor Michelle Bowman said on Friday that interest rates may have to be raised to control inflation, rather than a rate cut as her colleagues have suggested and markets had expected.
Bowman noted there are some potential upside risks to inflation and said policymakers need to be careful not to ease policy too quickly.
“While this is not my baseline outlook, I still think we may need to raise policy rates further at future meetings if inflation stalls or even reverses,” she said in remarks prepared for the panel. The Fed in New York Observers. “Lowering policy rates too early or too quickly could cause inflation to rebound, requiring further increases in policy rates to return inflation to 2% in the longer term.”
As a member of the Board of Governors, Bowman is a permanent voting member of the rate-setting Federal Open Market Committee. Her public speeches since taking office in late 2018 have taken her stance on the FOMC to be more hawkish, meaning she favors a more aggressive stance to curb inflation.
Bowman said her most likely outcome remains “eventually an appropriate lowering” of interest rates, though she noted that “we’re not there yet” because “I still see some upside risks to inflation.”
The speech to the shadow Open Market Committee comes as markets are nervous about the near-term outlook for Fed policy. Statements this week from several officials, including Chairman Jerome Powell, suggested they were taking a cautious approach to cutting interest rates. Atlanta Fed President Raphael Bostic, an FOMC electorate, told CNBC he may only cut interest rates once this year, while Minneapolis Fed President Nir Kashkari said , if inflation does not slow further, there will be no rate cut.
Futures traders expect three interest rate cuts this year, but the June-July rate cuts are already coming at a critical time. Federal Open Market Committee (FOMC) members in March also expected three interest rate cuts this year, but an unidentified official in the “dot plot” said that interest rates will not be cut until 2026, and there is no doubt about what proactive measures the Fed will take. , there are considerable differences between the parties.
“Given the risks and uncertainties in my economic outlook, I will continue to watch the data closely as I evaluate the appropriate path for monetary policy and remain cautious when considering future changes to the policy stance,” Bowman said.
Weighing inflation risks, she said supply-side improvements that helped numbers fall this year may not have the same impact going forward. In addition, she cited geopolitical risks and fiscal stimulus as other upside risks, as well as persistently higher home prices and a tight labor market.
“Inflation data from the past two months suggest that progress may be uneven or slower going forward, particularly for core services,” Bowman said.
Fed officials will focus on inflation data on Wednesday, when the Labor Department releases its March consumer price index report.
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