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Fed Governor Bowman says additional rate hike could be needed if inflation stays high

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7 months ago

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US Federal Reserve Governor Michelle Bowman attends a “Fed Listens” event at the Federal Reserve headquarters in Washington, DC, on October 4, 2019. 

Eric Baradat | AFP | Getty Images

Federal Reserve Governor Michelle Bowman said Friday that it’s possible interest rates may have to move higher to control inflation, rather than the cuts her fellow officials have indicated are likely and that the market is expecting.

Noting a number of potential upside risks to inflation, Bowman said policymakers need to be careful not to ease policy too quickly.

“While it is not my baseline outlook, I continue to see the risk that at a future meeting we may need to increase the policy rate further should progress on inflation stall or even reverse,” she said in prepared remarks for a speech to a group of Fed watchers in New York. “Reducing our policy rate too soon or too quickly could result in a rebound in inflation, requiring further future policy rate increases to return inflation to 2 percent over the longer run.”

As a member of the Board of Governors, Bowman is a permanent voting member of the rate-setting Federal Open Market Committee. Since taking office in late 2018, her public speeches have put her on the more hawkish side of the FOMC, meaning she favors a more aggressive posture toward containing inflation.

Bowman said her most likely outcome remains that “it will eventually become appropriate to lower” rates, though she noted that “we are still not yet at the point” of cutting as “I continue to see a number of upside risks to inflation.”

The speech, to the Shadow Open Market Committee, comes with markets on edge about the near-term future of Fed policy. Statements this week from multiple officials, including Chair Jerome Powell, have indicated a cautious approach to cutting rates. Atlanta Fed President Raphael Bostic, an FOMC voter, told CNBC he likely sees just one reduction this year, and Minneapolis Fed President Neel Kashkari indicated no cuts could happen if inflation does not decelerate further.

Futures traders are pricing in three cuts this year, though it has become a close call between June and July for when they start. FOMC members in March also penciled in three cuts this year, though one unidentified official in the “dot plot” indicated no decreases until 2026 and there was considerable dispersion otherwise about how aggressively the central bank would move.

“Given the risks and uncertainties regarding my economic outlook, I will continue to watch the data closely as I assess the appropriate path of monetary policy, and I will remain cautious in my approach to considering future changes in the stance of policy,” Bowman said.

Weighing inflation risks, she said that supply-side improvements that helped bring numbers down this year may not have the same impact going forward. Moreover, she cited geopolitical risks and fiscal stimulus as other upside risks, along with stubbornly higher housing prices and labor market tightness.

“Inflation readings over the past two months suggest progress may be uneven or slower going forward, especially for core services,” Bowman said.

Fed officials will get their next look at inflation data Wednesday, when the Labor Department releases the March consumer price index report.

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China set to report retail sales and industrial production data for October

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November 14, 2024

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Pictured here is a Shanghai development under construction on Nov. 4, 2024.

Cfoto | Future Publishing | Getty Images

BEIJING — China’s National Bureau of Statistics is scheduled Friday to release retail sales, industrial production and fixed-asset investment data for October.

Retail sales are expected to have picked up to 3.8% year-on-year growth, according to analysts polled by Reuters, after rising by 3.2% in September.

Industrial production was forecast to have risen by 5.6%, the poll showed, up from 5.4% the prior month.

Fixed-asset investment, reported on a year-to-date basis, was anticipated to post 3.5% growth from a year ago, up from the 3.4% pace in September, according to the poll.

Chinese authorities have ramped up stimulus announcements since late September, fueling a stock rally. The central bank has cut interest rates and extended existing real estate support.

On the fiscal front, the Ministry of Finance last week announced a five-year 10 trillion yuan ($1.4 trillion) program to address local government debt problems, and hinted more fiscal support could come next year.

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Manufacturing surveys indicated a pickup in activity last month, while exports surged at their fastest pace in more than a year.

Imports, however, fell as domestic demand remained soft. The core consumer price index that strips out more volatile food and energy prices rose by 0.2% in October from a year ago, modestly better than the 0.1% increase seen in September.

Beyond a trade-in program to encourage car and home appliance sales, Beijing’s stimulus measures have not targeted consumers directly.

China’s Golden Week holiday in early October affirmed a trend in more cautious consumer spending, but several consultants said that sales during the Singles Day shopping festival, which recently ended, had beat low expectations.

The country’s gross domestic product in the first three quarters of the year grew by 4.8%. The country has set a target of around 5% growth for the year.

This is a developing story. Please check back later for updates.

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