Michelle Bowman, a member of the US Federal Reserve Board of Governors, said on Tuesday that the US central bank will likely have to raise the cost of borrowing further to reduce inflation to the target rate of two percent in a reasonable period.
“My basic economic outlook continues to be that we will have to increase the federal funds rate further to keep policy restrained enough to bring inflation down to our 2 percent target in due course,” Bowman said in prepared remarks to the Federal Reserve Bank of America in Salt Lake City, Utah.
Earlier this month, the Federal Reserve kept its benchmark overnight lending rate unchanged in a range of 5.25 and 5.50 percent for the second meeting in a row.
Since then, Federal Reserve Chairman Jerome Powell has said that the central bank is ready to raise interest rates again, but will only do so if progress in returning inflation to the target rate of two percent falters.
But Bowman has long been among a small minority of policymakers who have said they believe the Fed's job is far from over.
According to the Fed's preferred measure, inflation fell to 3.4 percent in September after peaking at 7.1 percent last summer, and other Fed policymakers indicated that they still expect it will take longer for the full impact of the rise in the cost of borrowing to be felt on the Federal Reserve. over the past 20 months across the economy.
But Bowman was less confident about the adequacy of this, based on the fact that inflation is still high and that progress is uneven.
“In my view, given potential structural changes in the economy, such as higher demand for investment compared to saving, it is very likely that the level of the federal funds rate consistent with low and stable inflation will be higher than it was before the pandemic,” she added.
