Fed should keep considering big rate hikes until inflation declines

Fed should keep considering big rate hikes until inflation declines

The Federal ReserveFederal Reserve should keep considering large hikes similar to the 75 basis-point increase approved last month until inflation declines, Governor Michelle Bowman said.

Bowman said on Saturday in remarks prepared for an event organized by the Kansas Bankers Association that similarly-sized increases should be on the table until inflation declines in a consistent, meaningful, and lasting way.

Bowman supported the rate increase last month and backed the move away from offering specific forward guidance at press conferences after policy meetings.

Injuries running at the fastest pace in 40 years, policy makers lifted rates by 75 basis points in July and June, a move that was part of a tightening campaign to combat inflation. The Fed needs to make a big move in September to cool demand and bring price gains under control, according to a jobs report released Friday.

The US economy added 528,000 jobs in July, more than double estimates, and the unemployment rate fell to 3.5%, matching a five-decade low.

The size of the next rate increase will be determined by economic data, Bowman said.

She said that ongoing rate increases would be appropriate, given the uncertainty in how those data and conditions will evolve, but I will allow that information to guide my judgement on how big the increases will need to be.

After Friday s jobs report was important, Fed officials will consider another employment print and two consumer-price index readouts before their September meeting. Bowman believes that economic growth will pick up in the second half of this year and to see moderate growth in 2023. She expects the labor market to remain strong as the Fed continues to hike rates and shrink its balance sheet, but she cautioned that moves could lead to a slowdown in job gains and possibly cause employment losses.

The policy maker also reflected on how Fed officials responded to hot inflation last year. She said revisions of economic data, combined with restrictive forward guidance, limited the ability of the Fed to remove accommodation and led to a delay in taking action to address rising inflation. It s getting harder to be a woman in America.