Fed’s Bowman: Further rate hikes likely

Additional increases in the federal funds rate will likely be needed to lower inflation to the Federal Reserve’s 2% goal, Fed Governor Michelle Bowman said in two speeches on Friday and today. Speaking at events in Colorado and Georgia, Bowman noted that inflation has cooled since last year’s high but remains elevated. Consumer spending is robust, and demand for workers continues to exceed the supply of available job seekers, putting upward pressure on prices, she said.

“The recent lower inflation reading was positive, but I will be looking for consistent evidence that inflation is on a meaningful path down toward our 2% goal as I consider further rate increases and how long the federal funds rate will need to remain at a restrictive level,” Bowman said. “I will also be watching for signs of slowing in consumer spending and signs that labor market conditions are loosening.”

Bowman also reiterated that the banking sector remains resilient. “While banks have tightened lending standards in response to higher interest rates and funding costs, there have not been signs of a further sharp contraction in credit from the stress earlier this year that would slow economic activity,” she said. “Though loan balance growth has slowed, banks have continued to increase lending to households and businesses.”