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Federal Reserve Governor Michelle Bowman's Remarks on Interest Rates

Fed Governor Michelle Bowman suggests continued interest rate hikes to control inflation, which remains elevated and inconsistent with economic conditions.

Michelle Bowman
Michelle Bowman

Federal Reserve Governor Michelle Bowman stated that the US central bank should persist in raising interest rates to curb inflation which remains at an undesirably high level.

Bowman's Views on Inflation

During a Tennessee Bankers Association Credit Conference in Nashville, Bowman said, "I don't think we're seeing what we need to be seeing, especially with inflation. We'll have to continue to raise the federal funds rate until we start seeing much more progress on that." Bowman's comments align with other Fed officials this week, who stated that the central bank might need to raise interest rates more than initially planned to control persistent high inflation.

Recent Inflation Data

A report on Thursday indicated that a gauge of wholesale prices increased significantly in January, the most substantial increase since June. Data earlier in the week showed that consumer inflation remained elevated last month.

Michelle Bowman
Michelle Bowman

Interest Rates Hike

At their recent meeting, the Fed raised interest rates by a quarter of a percentage point, bringing the range from 4.5% to 4.75%. This increase followed a 50 basis-point hike in December and four consecutive 75 basis-point hikes last year. Fed officials have stated that the slower pace will permit them better to evaluate the impact of monetary policy on the economy. Banks and traders on Wall Street now anticipate rate increases at the March, May, and June meetings.

Bowman's Views on the Current Economic Situation

Bowman stated that inflation is still much too high and that there needs to be consistent data on the current economic conditions. When asked about the conditions that would prompt her to favor pausing the tightening campaign, Bowman said it would be "a consistent decline in inflation." At the same time, evidence suggests that rate increases have not slowed the economy, and borrowing costs have yet to reach a restrictive level.

Bowman concluded that the Fed has not yet defeated inflation and did not provide further clues on her preferred interest rate level or whether the Fed should revert to larger rate moves.