Fed’s Bowman: Willing to raise rates if inflation persists

Michelle W. Bowman, a member of the Federal Reserve Board of Governors, issued a warning, stating that there is a serious chance that inflation may stay high for a lot longer than most people think. Fed Board member Bowman gave a lecture at the Massachusetts Bankers Association Annual Convention in Key Biscayne outlining a significantly more conservative approach to the Fed’s current inflation outlook.

Key Quotes:

It remains unclear whether further supply-side improvements will continue to lower inflation.

Monetary policy appears to be restrictive.

Bowman sees several upside inflation risks in outlook.

Continues to hold that inflation should slowly move lower as long as policy holds.

Remains willing to raise rates further if data shows inflation progress has stalled or reversed.

Expects inflation to remain elevated for some time.

The extent of data revisions in the past few years makes assessing the economy even more challenging.

Geopolitical developments remain a key upside risk to inflation.

Too-loose financial conditions remains a risk, fiscal stimulus could drive demand higher, stalling or even reversing inflation progress.

There remains a high risk that consumer, more immigration, and tight labor market conditions could lead to persistently high inflation.