Bowman, the first Fed official to speak since Chair Jerome Powell‘s remarks Wednesday, said recent inflation data suggest the low readings seen at the end of 2023 appear to have been temporary.
“I expect inflation to remain elevated for some time,” Bowman said Friday in remarks prepared for the Massachusetts Bankers Association Annual Convention in Key Biscayne, Florida.
“My baseline outlook continues to be that inflation will decline further with the policy rate held steady, but I still see a number of upside inflation risks that affect my outlook,” she said.
Bowman added that monetary policy does appear to be restrictive, though incoming data will determine whether it is sufficiently so to return inflation to the Fed’s 2% target.US central bankers left their benchmark rate unchanged this week at a more than two-decade high, while slowing their balance sheet runoff. Following the decision, Powell said the data so far this year have not given the committee “greater confidence” that inflation is headed toward 2% on a sustainable basis.While Powell said an interest rate increase is “unlikely,” Bowman reiterated she would be willing to hike if inflation progress stalls or reverses. The Fed governor cited a number of upside inflation risks, such as the scarcity of housing amid a growing workforce, and still strong wage growth. Bowman said last month it would be appropriate to reduce the benchmark lending rate gradually if data continue to indicate inflation is cooling.
