Fed’s Bowman over the weekend: Additional rate hikes will be needed

Fed Governor Michelle Bowman spoke over the weekend and said:

• We should remain willing to raise rates at a future meeting if data show inflation progress has stalled.
• In considering further rate hikes and how long to keep rates restrictive, consistent drops in inflation will be looked for.
• Additional U.S. interest-rate increases will be needed.
• Monetary policy is not on a preset course.
• Slowing consumer spending and loosening in labor market conditions will be watched for.
• Recent decline in core inflation is a ‘positive’ sign, but inflation remains well above target.
• Demand for workers exceeds supply, adding upward pressure on prices.
• No signs of sharp credit contraction from March banking turmoil.

Bowman supported the Fed’s quarter-point increase in interest rates last month due to high inflation, strong consumer spending, a rebound in the housing market, and a labor market that’s driving up prices.

In June forecasts, most Fed policymakers expected the year to end with the Fed policy rate at 5.6%, a quarter-point above the setting established in late July. However, Bowman’s comments suggest she believes the rate will need to go higher.

After the recent rate hike, Fed Chair Jerome Powell left the possibility open for another increase in September, but also indicated that cooler data could justify a pause.

On Friday, NFP showed some slowing of the pace of hires, but despite the slowing, the unemployment remains at 3.5%, and there are more available jobs than workers to fill them.

This week, the US CPI will be released on Thursday with expectations of 0.2% for the headline and the core. That YoY is expected to rise to 3.3% from 3.0% last month. A year ago the CPI was reported at 0.0%. That will roll out of the inflation calculation and be replaced by 0.2% increase.

Bowman comments are a bit more hawkish than those of Goolbee and Bostic from last week. She is a permanent voting member of the Fed. Below are the links to the comments from Fed’s Goolsbee and Bostic from last week.

Goolsbee:

Bostic