Fed Governor Bowman sees ‘similarly sized’ rate hikes ahead of three-quarters of a point move

Federal Reserve Bank governor Michelle Bowman makes her first public remarks as a federal decision maker at the American Bankers Association conference in San Diego, California, February 11, 2019.

Anna Szafir | Reuters

Federal Reserve Governor Michelle Bowman said on Saturday that she supports the recent large-scale central bank interest rate hikes and believes they will continue until inflation is contained.

The Fed raised its benchmark interest rates by 0.75 percentage points at its last two political meetings, the largest increase since 1994. These moves were intended to contain inflation, which was at its highest in more than 40 years.

In addition to the increases, the Federal Open Market Committee has indicated that “continuous increases … will be appropriate,” a view that Bowman supports.

“In my opinion, hikes of a similar magnitude should be on the table until we see inflation fall in a consistent, meaningful and sustained manner,” she added in a comment prepared in Colorado for the Kansas Bankers Association.

Bowman’s comments are the first statements from a member of the Board of Governors since the FOMC last week approved the latest rate hike. Over the past week, many regional presidents said they also expect rates to continue to rise aggressively until inflation comes down from the current annual rate of 9.1%.

Following Friday’s hiring report, which showed 528,000 jobs added in July and employee salaries 5.2% y / y, both higher than expected, markets priced a 68% chance for a third consecutive move by 0.75pp at the next meeting FOMC in September according to CME Group data.

Bowman said she would be closely monitoring the upcoming inflation data to gauge exactly how much she believes rates should be raised. However, she said the latest figures cast doubt on hopes that inflation has peaked.

“I’ve seen little, if any, concrete hints that support this expectation and will have to see clear evidence of this decline before including easing inflationary pressures in my outlook,” she said.

Moreover, Bowman said she saw “a significant risk of high inflation next year for basic necessities such as food, housing, fuel and vehicles.”

Her comments follow other figures showing that US economic growth as measured by GDP contracted two consecutive quarters, meeting the common definition of a recession. She said she expected growth to pick up in the second half and “moderate growth in 2023,” but inflation remains the biggest threat.

“A greater threat to a strong labor market is excessive inflation, which, if allowed to continue, could lead to a further downturn, risking a prolonged period of economic weakness combined with high inflation, as was the case in the 1970s. we must fulfill our commitment to bring down inflation and I will remain persistently focused on the task, ”Bowman said.

Leave a Comment