Fed Governor Bowman Says She Expects More Rate Hikes

Federal Reserve Governor Michelle Bowman said on Tuesday that she expects the central bank will have to hike rates further to bring inflation down to its two percent target.

“My baseline economic outlook continues to expect that we will need to increase the federal funds rate further to keep policy sufficiently restrictive to bring inflation down to our 2% target in a timely way,” Bowman said in a speech to bankers and businessmen in Salt Lake City, Utah. “However, monetary policy is not on a preset course, and I will continue to closely watch the incoming data as I assess the implications for the economic outlook and the appropriate path of monetary policy.”

Bowman interned for Senator Bob Dole after she graduated from law school in 1995 and went on to serve as counsel to two congressional committees. Later Bowman worked in various roles at Farmer’s and Drover’s Bank in Kansas and was nominated in 2016 by Kansas Governor Sam Brownback to the position of Kansas banking commissioner. She was appointed by President Donald Trump to a 14-year term on the Fed in 2018.

In her speech, Bowman said there were “several uncertainties” surrounding her baseline outlook, including whether the labor force will continue to grow and whether supply chain improvement will continue to be a disinflationary force in the economy. She also warned that an increase in consumption of services could add to inflationary pressures.

“I remain willing to support raising the federal funds rate at a future meeting should the incoming data indicate that progress on inflation has stalled or is insufficient to bring inflation down to 2 percent in a timely way,” Bowman said.

Notably, Bowman did not mention a risk of a recession or higher interest rates unnecessarily holding back economic growth, highlighting that inflation is still the greater risk in her view.

“We should keep in mind the historical lessons and risks associated with prematurely declaring victory in the fight against inflation, including the risk that inflation may settle at a level above our 2% target without further policy tightening,” Bowman said.