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Fed Governor Bowman sees ‘similarly sized’ rate hikes ahead after three-quarter point moves

Federal Reserve Bank Governor Michelle Bowman gives her first public remarks as a Federal policymaker at an American Bankers Association conference In NORTH PARK, California, February 11 2019.

Ann Saphir | Reuters

Federal Reserve Governor Michelle Bowman said Saturday she supports the central bank’s recent big interest increases and thinks they’re more likely to continue until inflation is subdued.

The Fed, at its last two policy meetings, raised benchmark borrowing rates by 0.75 percentage point, the biggest increase since 1994. Those moves were targeted at subduing inflation running at its highest level in a lot more than 40 years.

As well as the hikes, the rate-setting Federal Open Market Committee indicated that “ongoing increases … will undoubtedly be appropriate,” a view Bowman said she endorses.

“My view is that similarly sized increases ought to be up for grabs until we see inflation declining in a frequent, meaningful, and lasting way,” she added in prepared remarks in Colorado for the Kansas Bankers Association.

Bowman’s comments will be the first from the person in the Board of Governors because the FOMC the other day approved the most recent rate increase. In the last week, multiple regional presidents have said in addition they expect rates to keep to go up aggressively until inflation falls from its current 9.1% annual rate.

Following Friday’s jobs report, which showed an addition of 528,000 positions in July and worker pay up 5.2% year over year, both greater than expected, markets were pricing in a 68% potential for a third consecutive 0.75 percentage point move at another FOMC meeting in September, in accordance with CME Group data.

Bowman said she’ll be watching upcoming inflation data closely to gauge the way in which much she thinks rates ought to be increased. However, she said the recent data is casting doubt on hopes that inflation has peaked.

“I’ve seen few, if any, concrete indications that support this expectation, and I will have to see unambiguous proof this decline before I incorporate an easing of inflation pressures into my outlook,” she said.

Moreover, Bowman said she sees “a substantial threat of high inflation into next year for necessities including food, housing, fuel, and vehicles.”

Her comments come following other data showing that U.S. economic growth as measured by GDP contracted for just two straight quarters, meeting a standard definition of recession. While she said she expects a pickup in second-half growth and “moderate growth in 2023,” inflation remains the largest threat.

“The bigger threat to the strong labor market is excessive inflation, which if permitted to continue may lead to an additional economic softening, risking an extended amount of economic weakness in conjunction with high inflation, like we experienced in the 1970s. Regardless, we should fulfill our commitment to lowering inflation, and I’ll remain steadfastly centered on this,” Bowman said.

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