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

“My view is that similarly-sized increases should be on the table until we see inflation declining in a consistent, meaningful, and lasting way,” Bowman said Saturday in remarks prepared for an event organized by the Kansas Bankers Association.

Bowman added that she supported last month’s rate increase and backed the move away from offering specific forward guidance at the press conferences following policy meetings.

Policy makers lifted rates by 75 basis points in July and June, part of an aggressive tightening campaign aimed at cooling inflation that’s running at the fastest pace in 40 years. A strong jobs report released Friday adds more pressure on the Fed to make another big move in September to cool demand and bring price gains under control.

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 ultimately be decided by economic data, Bowman said.

“While I expect that ongoing rate increases will be appropriate, given the uncertainty in how those data and conditions will evolve, I will allow that information to guide my judgment on how big the increases will need to be,” she said.

While Friday’s jobs report was important, Fed officials will also consider one more employment print and two consumer-price index readouts before their September meeting. The July data on consumer prices comes out on Aug. 10.

Bowman said she expects economic growth to pick up in the second half of this year and to see “moderate growth” in 2023. She expects the labor market to stay strong as the Fed continues raising rates and shrinking its balance sheet, but she cautioned the moves could lead to a slowdown in job gains and potentially spark 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 Fed’s ability to remove accommodation and “led to a delay in taking action to address rising inflation.”

Source:
courtesy of BLOOMBERG

by Jonnelle Marte

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