US Rate Hikes Likely, Says Fed’s Bowman

In her latest remarks, Governor Michelle Bowman of the U.S. Federal Reserve has expressed her support for the recent quarter-point interest rate increase. Citing persistently high inflation, robust consumer spending, a rebounding housing market, and a tight labor market contributing to rising prices, she believes additional rate hikes will be necessary to bring inflation down to the Fed’s 2 percent target.

Bowman emphasized that monetary policy is not set in stone and will be guided by incoming data. Should progress on inflation stall, the Fed remains open to raising the federal funds rate at future meetings.

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While some policymakers had projected ending the year with the policy rate at 5.6%, Bowman’s use of the plural “rate increases” indicates she believes the Fed might need to go higher. Despite a recent dip in inflation to a 3% annual rate, down from 9% last year, Bowman remains vigilant for consistent evidence that inflation is heading toward the 2 percent goal. She also intends to closely monitor consumer spending and labor market conditions for signs of potential easing.

Notably, the Fed Chair Jerome Powell had left the possibility of another rate increase in September on the table, while also indicating that cooler data could lead to a pause.

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On a positive note, Bowman highlighted that there has been some progress in inflation reduction, and banks continue to lend to households and businesses, albeit at a slower pace than before. She also mentioned that the labor market, although experiencing a slowdown in hiring, still maintains a low unemployment rate of 3.5%, with a significant number of available jobs compared to the workforce.

As the Fed grapples with balancing economic indicators, Bowman’s hawkish stance sets her apart from some of her colleagues, making her an influential voice in shaping future monetary policy decisions.