Fed’s Bowman reiterates need to keep raising rates to curb inflation
Federal Reserve Governor Bowman said on Tuesday that although there are encouraging signs that inflation is falling, there is still a lot of work to be done, and interest rates need to continue to be raised to achieve the 2% inflation target.
After Bowman’s comments, U.S. stocks fell short-term, but their “hawkishness” was far less than yesterday’s two Fed officials, and the three major indexes then fluctuated higher.
Earlier, Federal Reserve Chairman Jerome Powell delivered his first speech of the new year, but its theme was the independence of the central bank, and he did not make clear comments on the outlook for monetary policy, so it did not have a significant impact on the market.
“I’m committed to taking further action to bring inflation down to our target level,” Bowman said at an event hosted by the Florida Bankers Association. “We’ve seen some measures of inflation come down in recent months, but we still have a lot of work to do, so I expect the FOMC to keep raising rates and tightening monetary policy.”
As for the size of future rate hikes and the eventual rate peak, Bowman said it will depend on upcoming data and its impact on inflation and the economic outlook.
Bowman pointed out that he will look for convincing signs that inflation has peaked to determine the size of future interest rate hikes, and the federal funds rate needs to be raised to a restrictive level.
Federal Reserve officials will hold the first interest rate meeting in 2023 on January 31 and February 1. The market currently expects that the possibility of the Fed raising interest rates by 25 basis points at that time is 75%.
Bowman believes that maintaining stable inflation is crucial to supporting a strong labor market. Given that the job market remains resilient even as the Fed tightens policy, Bowman hopes that the Fed can continue to raise interest rates to reduce inflation without triggering a recession. .
Bowman is also more optimistic regarding the economic outlook, she believes that the Fed can successfully reduce inflation without triggering a severe recession.
Bowman warned that economic growth might slow further in the event of unforeseen shocks. She emphasized that inflation is partly a global problem and that monetary policy cannot do anything regarding supply chain disruptions and the Russia-Ukraine conflict.
Additionally, Bowman said cryptocurrencies can pose significant risks and the Fed will continue to monitor banks’ exposure to cryptocurrencies. But she expects some banks will continue to explore how to integrate cryptocurrencies into their operations, and the Fed “doesn’t want to hinder innovation.”
This article is forwarded by “Huitong Finance” authorized by the Financial Association
