By 
Governor Michelle Bowman of the U.S. Federal Reserve stated on Saturday (August 5, 2023) that the central bank will likely need to implement further interest rate hikes to address the ongoing inflation surge.
Bowman expressed her support for the Fed’s quarter-point increase in interest rates last month, citing the persistently high inflation, robust consumer spending, a rebound in the housing market, and a strong labor market contributing to upward price pressures.
She emphasized that additional rate increases would be necessary to steer inflation toward the Federal Open Market Committee’s (FOMC) 2 percent target. Bowman clarified that monetary policy is not predetermined and future decisions will be data-driven.
“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 stated during her remarks to the Kansas Bankers Association.
Known for her hawkish stance on monetary policy, Bowman’s comments signaled a belief that the Fed might need to go beyond the projected 5.6% policy rate at the end of the year, as forecasted by most Fed policymakers in June.
After the latest rate increase, Federal Reserve Chair Jerome Powell left the possibility of another hike in September open, but he also suggested that a slowdown in data could lead to a pause in rate adjustments.
Regarding inflation progress, Bowman acknowledged that the recent decline to a 3% annual rate in June (down from 9% in mid-2022) was positive. However, she stressed the need for consistent evidence of inflation moving closer to the 2 percent target.
“I will also be watching for signs of slowing in consumer spending and signs that labor market conditions are loosening,” she added.
Bowman noted that despite a slowdown in hiring in June, the unemployment rate remains low at 3.5%, and there are still more job openings than available workers.
She further mentioned that banks are still increasing lending to households and businesses, though at a slower pace than before, and there has been no sharp contraction of credit since the banking turmoil in March.
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