Fed Governor Michelle Bowman said Friday she expects inflation to remain elevated and repeated that she wouldn't rule out raising rates if needed.
“While the current stance of monetary policy appears to be at a restrictive level, I remain willing to raise the target range for the federal funds rate at a future meeting should the incoming data indicate that progress on inflation has stalled or reversed,” she said in a speech in Nashville, Tenn., echoing previous comments.
New data on inflation this week from the consumer price index showed progress. In April, CPI on a "core" basis, which strips out food and energy prices, rose 3.6% year over year. That was in line with expectations, and it cooled from the 3.8% increase seen in March. Headline CPI slowed to 3.4% annual growth.
But that hasn’t swayed Bowman.
“After seeing considerable progress on slowing inflation last year, we have not yet seen further progress this year,” she said. “I expect inflation to remain elevated for some time.”
Bowman noted that much of the drop in inflation last year was thanks to supply chains resolving and that a recent pickup in prices in goods and services categories suggests inflation was temporarily lower in the latter half of last year.
Bowman also said that while there have been signs the job market has been coming into better balance, “progress has slowed.” She noted that recent jobs reports show a strong job market with the unemployment rate remaining below 4%, and she also pointed to the number of job openings still above pre-pandemic levels.
She said that as of now, monetary policy stance appears to be restrictive and that she’ll continue to monitor the incoming data to assess that stance.
“As I’ve noted recently, my baseline outlook continues to be that inflation will decline further with the policy rate held steady, but I still see a number of upside inflation risks that affect my outlook.”
Bowman's comments come after Fed Chair Jerome Powell this week reiterated that rates are likely to stay higher for longer as inflation continues to persist in the economy.
Powell made it clear Tuesday that he thinks the Fed will need more than a quarter's worth of data to really make a judgment on whether inflation is steadily falling toward its 2% target.
That implies it will take more than three inflation reports for the Fed to feel confident about lowering rates from a 23-year high, putting the odds on a first rate cut in September if the data supports such a move.
Investors now anticipate roughly two 25-basis-point cuts this year, down from the six cuts expected at the start of the year, according to updated Bloomberg data.