Federal Reserve Bank Governor Michelle Bowman delivers her first public remarks as a Federal policymaker at an American Bankers Association conference in San Diego, California, February 11, 2019.
Ann Sapphire | Reuters
Federal Reserve Governor Michelle Bowman said on Saturday that she supports the central bank’s recent large interest rate hikes and thinks they are likely to continue until inflation subsides.
The Fed, at its last two policy meetings, benchmark lending rates raised by 0.75 percentage points, the largest increase since 1994. Those measures were aimed at reducing inflation at the highest level for more than 40 years.
In addition to the hikes, the rate-setting Federal Open Market Committee indicated that “continued increases … will be appropriate,” a view Bowman said she supports.
“My view is that increases of the same size should be on the table until we see inflation coming down in a consistent, meaningful and lasting way,” she said in prepared remarks in Colorado for the Kansas Bankers Association.
Bowman’s comments are the first from a member of the Board of Governors since the FOMC approved the latest rate hike last week. In the past week, multiple regional presidents have said it they also expect rates to continue to rise strongly until inflation falls from its current annual rate of 9.1%.
Following Friday jobs reportwhich showed an addition of 528,000 jobs in July and worker wages up 5.2% year over year, both higher than expected, markets were pricing in a 68% chance of a third 0.75 percentage point move meeting at the next FOMC meeting in September, according to CME Group Details.
Bowman said she will be watching upcoming inflation data closely to measure exactly how much rates should be raised, according to her. However, she said that recent data is casting doubt on expectations that inflation has peaked.
“I have seen little, if any, concrete evidence to support this expectation, and I will need to see unequivocal evidence of this reduction before I add easing inflationary pressures to my view,” she said.
In addition, Bowman said she sees “significant risk of high inflation into next year for necessities including food, housing, fuel and vehicles.”
Her comments follow other data showing that US economic growth as measured by GDP contracted for two straight quarterss, meeting a common definition of the recession. While she said she expects growth to pick up in the second half and “moderate growth in 2023,” inflation remains the biggest threat.
“The biggest threat to a strong labor market is excessive inflation, which if allowed to continue could lead to further economic contraction, risking a prolonged period of economic weakness coupled with high inflation, as we had in the 1970s. We must fulfill our commitment to lower inflation, and I will be steadily focused on this task,” said Bowman.