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Fed's Bowman says more US rate hikes likely will be needed

Published Aug 05, 2023 12:15PM ET Updated Aug 05, 2023 12:21PM ET
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© Reuters. FILE PHOTO: U.S. Federal Reserve Governor Michelle Bowman poses at a conference on monetary policy at The Hoover Institution in Palo Alto, California, U.S., May 3, 2019. REUTES/Ann Saphir/File Photo

(Reuters) - The U.S. Federal Reserve will likely need to raise interest rates further to bring down inflation, Governor Michelle Bowman said on Saturday.

Bowman said she supported the Fed's quarter-point increase in interest rates last month, given still-high inflation, strong consumer spending, a rebound in the housing market and a labor market that is helping to feed higher prices.

"I also expect that additional rate increases will likely be needed to get inflation on a path down to the FOMC’s 2 percent target," she said in remarks prepared for delivery to the Kansas Bankers Association, referring to the Fed's rate-setting panel, the Federal Open Market Committee.

Monetary policy is not on a "preset course," she also said, and data will drive future decisions.

"We should remain willing to raise the federal funds rate at a future meeting if the incoming data indicate that progress on inflation has stalled."

Bowman has frequently expressed views that are more hawkish than some of her colleagues.

In forecasts published in June, most Fed policymakers expected to end the year with the Fed policy rate at 5.6%, one quarter-point hike above the setting established at the Fed's late-July meeting.

Bowman's use of the plural "rate increases" in her remarks on Saturday indicates she thinks the Fed will need to go higher than that.

After the most recent rate hike, Fed Chair Jerome Powell left the door open to another increase in September, but also signaled that cooler data could allow a pause.

Bowman noted some progress on inflation, which by the widely followed consumer price index slowed to a 3% annual rate in June, down from 9% in the middle of last year.

"The recent lower inflation reading was positive, but I will be looking for consistent evidence that inflation is on a meaningful path down toward our 2 percent goal as I consider further rate increases and how long the federal funds rate will need to remain at a restrictive level," she said.

"I will also be watching for signs of slowing in consumer spending and signs that labor market conditions are loosening."

The Labor Department's monthly job market report on Friday showed hiring slowed in June, but unemployment, at 3.5%, remains slow, and Bowman noted there are still many more available jobs than there are workers to fill those jobs.

Banks also continue to increase lending to households and businesses, albeit at a slower pace than when interest rates were lower, with no sharp contraction of credit since the banking turmoil in March, she said.

Fed's Bowman says more US rate hikes likely will be needed
 

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Comments (7)
Lukas Hajek
Lukas Hajek Aug 06, 2023 6:31PM ET
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LOL!
Stephen Fa
Stephen Fa Aug 05, 2023 8:12PM ET
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Listen folks.
Mesna Kroglica
Mesna Kroglica Aug 05, 2023 5:16PM ET
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RAISE RATES! Why? If they keep them around 7% (historical average) we can return to the real economy. High loans will mean that people won't be able to buy houses and cars that easily. Why is this good you may ask? Well if the demand decreases the prices fall. And people might just be able to buy a house again. Back in the 60s the interest rates were relativly high yet the houses were cheap.
Vic Bee
Vic Bee Aug 05, 2023 3:35PM ET
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“ Market down on Monday” that’s everyone’s thinking. Market will do the opposite! Y’all should kkk no ow this. Loading up !
Mesna Kroglica
Mesna Kroglica Aug 05, 2023 3:35PM ET
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nah dude the correction is happening. The rally has lasted for 10 months now
Estevan Canales
Estevan Canales Aug 05, 2023 3:08PM ET
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Inflation is definitely coming back up again, gas in my area is already up a whole dollar from a few months ago, that will trickle down and make everything else more expensive. I think terminal rate should be around 6%
Vikings Norway
Vikings Norway Aug 05, 2023 12:51PM ET
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The inflation is going up again due to Russia sanctions. Now we condemned cheap Russian grains!
Mark Jannetty
Mark Jannetty Aug 05, 2023 12:51PM ET
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Russia has almost zero effect on inflation. Inflation has been a policy problem and will not be resolved for another year and a half
Howard Austin
Howard Austin Aug 05, 2023 12:30PM ET
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Market down on Monday because of her statement.
 
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