LD
Should “progress on inflation stall, or even reverse,” it is possible the U.S. central bank may have to raise interest rates further, Federal Reserve Governor Michelle Bowman said on Friday, deviating from the rate cuts her colleagues have called for.
“While it is not my baseline outlook, I continue to see the risk that at a future meeting we may need to increase the policy rate further should progress on inflation stall or even reverse,” she said in prepared remarks to the Shadow open Market Committee in New York.
Bowman, a permanent voting member of the policy-setting Federal Open Market Committee, added that she will continue to keep a close eye on incoming economic data and will stay “cautious in my approach to considering future changes in the stance of policy.”
She emphasized that policymakers should be careful not to cut rates too soon, pointing to a slew of upside risks to inflation, from a tight labor market to fiscal stimulus to elevated house prices. And the sticky inflation readings so far this year “suggest progress may be uneven or slower going forward, especially for core services.”
“Reducing our policy rate too soon or too quickly could result in a rebound in inflation, requiring further future policy rate increases to return inflation to 2 percent over the longer run,” she said.
