Federal Reserve Governor Michelle Bowman has stated that the US central bank may need to raise interest rates further in order to fully restore price stability. Bowman, speaking at an event with the Kansas Bankers Association, supported the decision to raise rates at the Fed’s meeting last month. However, she highlighted the need for additional rate increases to bring inflation down to the Federal Open Market Committee’s (FOMC) 2% target. Bowman emphasized the importance of consistent evidence of sustained disinflation and signs of slowing consumer spending and loosening labor market conditions before considering further rate increases. The Fed’s July rate hike brought the federal funds rate to the highest level in 22 years, with two more rate increases projected for this year. Bowman noted that incoming data would be assessed, and policymakers should be prepared to raise rates if inflation progress stalls.
Recently released data from the Bureau of Labor Statistics showed that nonfarm payrolls increased by 187,000 in the previous month, lower than expected. However, the unemployment rate unexpectedly dropped to 3.5%, one of the lowest readings in decades. Following the release of the jobs data, two Fed officials expressed differing views on the future of interest rates. Atlanta Fed President Raphael Bostic suggested that he doesn’t see the need for additional rate hikes, as he expected the economy to slow down gradually. On the other hand, Chicago Fed President Austan Goolsbee emphasized the need for patience in the disinflation process and hoped that inflation could be brought down without causing a recession. He stated that policymakers would soon need to consider when to hold interest rates steady and for how long.
The Federal Reserve has three more policy meetings scheduled for 2023, with the next meeting taking place in September. Bowman’s remarks indicate a cautious approach to future rate decisions, with a focus on monitoring inflation and other economic indicators. The central bank aims to strike a balance between achieving price stability and supporting economic growth.