US Federal Reserve Governor Michelle Bowman said she is sticking with her call that interest rates would likely need to increase further to quickly return inflation to the Fed’s 2 percent goal.
US inflation remains “too high” and Bowman said she expects it would 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 percent goal in a timely way,” according to her prepared remarks to the Connecticut Bankers Association on Saturday.
Bowman repeated her warning that “high energy prices could reverse some of the progress we have seen on inflation in recent months.”
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US employment surged last month, bolstering the case for another Fed interest rate increase.
Bowman on Saturday cited Fed expectations that inflation would stay above target at least until the end of 2025, according to the median forecast released after the central bank’s policy meeting last month.
“This, along with my own expectation that progress on inflation is likely to be slow given the current level of monetary policy restraint, suggests that further policy tightening will be needed to bring inflation down in a sustainable and timely manner,” Bowman said.
She did not comment directly on whether she would support a rate increase at the Fed’s next meeting on Oct. 31 and Nov. 1.
Minutes from the Fed’s policy meeting last month, due on Wednesday, might help shed light on how much central bankers are leaning toward raising interest rates again before the end of the year.
NO DECISION YET
Meanwhile, no key interest-rate decisions are scheduled this week as the global central banking community convenes in the Moroccan city of Marrakesh for annual meetings of the IMF and the World Bank.
“The blowout September jobs report didn’t settle the debate about whether the Fed is done hiking rates. Two critical upcoming economic indicators — the CPI and the University of Michigan consumer-sentiment survey — may give a more definitive read,” Bloomberg Economics economists Anna Wong, Stuart Paul and Eliza Winger said in a note.
“We expect September core CPI inflation to come in somewhat higher than consistent with the Fed’s 2 percent mandate, while higher gasoline prices may have pushed up short-term inflation expectations in the preliminary UMichigan survey for October,” they said.
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