(Bloomberg) -- Federal Reserve Governor Michelle Bowman signaled that she favors raising interest rates again and probably more than once, suggesting she would move more aggressively than her US central bank colleagues to quash inflation.
“I continue to expect that further rate hikes will likely be needed to return inflation to 2% in a timely way,” Bowman said Friday, using the plural “hikes” to describe her rate expectations.
She noted that Fed officials expect inflation to stay above 2% until at least the end of 2025, according to the median forecast policymakers submitted in quarterly economic projections released this week.
“This, along with my own expectation that progress on inflation is likely to be slow given the current level of monetary policy restraint, suggests that further policy tightening will be needed to bring inflation down in a sustainable and timely manner,” she said in remarks prepared for an event hosted by the Independent Community Bankers of Colorado.
Fed officials left their benchmark lending rate unchanged Wednesday in a range of 5.25% to 5.5%. Most officials forecast at least one more rate hike this year, and the median policymaker saw the federal funds rate at 5.1% by the end of 2024, higher than previously estimated.
Bowman’s comments suggest she might have the highest interest-rate forecast for 2024, when one official predicted the federal funds rate would be in a range of 6% to 6.25%.
While there has been considerable progress in lowering inflation, higher energy costs present a risk for achieving the 2% inflation goal, Bowman said.
“I see a continued risk that energy prices could rise further and reverse some of the progress we have seen on inflation in recent months,” she said.
The Fed governor also noted that monetary policy appears to be having less bite on lending than might be expected.
“Despite this tightening of bank lending standards, we have not seen signs of a sharp contraction in credit that would significantly slow economic activity,” she said.
“Though bank loan balance growth has slowed, the ongoing strong balance sheets of households and businesses combined with the growing importance of non-banks as sources of credit suggest that the effects of monetary policy on bank lending may have smaller effects on the economy than in the past.”
Bowman joined the Fed Board in 2018 and was subsequently reappointed to a 14-year term. She previously served as the state bank commissioner of Kansas from January 2017 to November 2018.
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