Fed’s Bowman: More rate rises needed to combat high inflation

Fed’s Michelle Bowman said on Tuesday the US central bank will have to raise interest rate further to combat high inflation. These remarks come a slew of hawkish remarks from other Fed speakers this week. “Inflation is much too high,” she added.

She also noted that “while the effects of monetary policy tightening on the job market have generally been limited so far, slowing the economy will likely mean that job creation also slows”.

Bowman said that for her to know inflation has eased enough for the Fed to stop hiking rates, she will “be looking for compelling signs that inflation has peaked and for more consistent indications that inflation is on a downward path”.

The US dollar was subject to modest level selling pressure after Fed Chair Jerome Powell unrelated comments at the start of Monday’s US session: ”We are not and will not be a climate policymaker”.

The Dollar Index is trading around 103.25 and flat on the day in the middle of the 103.03/49 range. However, it has been recovering from a seven-month low of 102.9 in the prior session as hawkish remarks from Fed policymakers this week so far have sparked a fresh wave of demand for the US Dollar.

San Francisco Fed president Mary Daly noted yesterday that she expects interest rates to rise beyond 5% in 2023. On the same day, Raphael Bostic argued policymakers should hike above 5% by early in the second quarter and hold rates there for a long time.

“We have a lot more work to do” she added in prepared remarks for a speech to a banking group in Florida. Bowman also said she expects the rate-setting FOMC “will continue raising interest rates to tighten monetary policy, as we stated after our December meeting,” while noting the pace of future actions will be driven by how the economy performs.

“Once we achieve a sufficiently restrictive federal funds rate, it will need to remain at that level for some time in order to restore price stability, which will in turn help to create conditions that support a sustainably strong labor market,” Bowman said.

“I take this as a hopeful sign that we can succeed in lowering inflation without a significant economic downturn”.