A Federal Reserve official said the central bank should be prepared to continue lifting interest rates because inflation remains too high and the labor market is too tight, hinting at disagreements within the central bank’s rate-setting committee.
A Federal Reserve official said the central bank should be prepared to continue lifting interest rates because inflation remains too high and the labor market is too tight, hinting at disagreements within the central bank’s rate-setting committee. Fed governor Michelle Bowman, in remarks prepared for delivery Friday at a banking conference in Germany, said she wasn’t confident the central bank was making enough progress slowing down economic activity and inflation even though she allowed that interest rates were now at a restrictive setting. The Fed raised its benchmark rate May 3 by a quarter percentage point to a range between 5% and 5.25%, a 16- year high, and Fed Chair Jerome Powell suggested officials could entertain a pause at the central bank’s June 13-14 meeting. At the Fed’s meeting in March, most officials projected holding rates steady after the latest increase, in part because they expect bankingsystem stresses following the failures of three midsize lenders this year to further tighten financial conditions. But a substantial minority of Fed officials rise by a further quarter pexpected rates would need tooint from current levels if the economy performed in line with their expectations. Ms. Bowman’s remarks suggested she was part of that group favoring higher rates. “Should inflation remain high and the labor market remain tight, additional monetary policy tightening will likely be appropriate to attain a sufficiently restrictive stance of monetary policy to lower inflation over time,” she said in her remarks in Germany. Ms. Bowman said she would be looking for “consistent evidence that inflation is on a downward path” to determine whether interest rates were at a sufficiently restrictive level. The most recent readings on inflation and employment released over the past week, she added, “have not provided consistent evidence that inflation is on a downward path.” Ms. Bowman, who joined the Fed’s board in 2018, focused the bulk of her remarks on the implications for banking supervisors and regulators of this year’s bank failures.
