Fed's Bowman Says More Rate Hikes Needed to Ensure 'Timely' Inflation Control

MACROECONOMICS - WASHINGTON. The U.S. central bank needs to raise interest rates further to control inflation in a "timely way," Federal Reserve Governor Michelle Bowman said on Friday in remarks that sketched out a hawkish argument based on a potential rise in energy prices and a possibility the inflation battle may take years to complete.

"Inflation is still too high, and I expect it will likely be appropriate for the (Federal Open Market) Committee to raise rates further and hold them at a restrictive level for some time to return inflation to our 2% goal in a timely way," Bowman said in prepared remarks for an Independent Community Bankers of Colorado event.

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"Progress on inflation is likely to be slow given the current level of monetary policy restraint," she said, noting that in policymaker projections issued by the Fed earlier this week inflation remains above the 2% target "at least until the end of 2025."

Bowman said she supported the central bank's decision this week to hold its benchmark overnight interest rate in the 5.25%-5.50% range for now because of "mixed data" that alongside signs of continued "solid" economic growth also included some decline in inflation and evidence of slowing job growth.

But the picture isn't clear, she said, with a particular risk that "energy prices could rise further and reverse some of the progress we have seen."

New projections issued at the end of a two-day policy meeting on Wednesday showed Fed officials at the median expect one additional rate increase this year. None expected rates to rise more than that in 2023.

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One Fed official does see the policy rate continuing even higher to breach 6% in 2024, while at least 13 of 19 anticipate rate cuts.