Federal Reserve Governor Michelle Bowman said Friday that if inflation remains high and the job market remains strong, more interest rate hikes would be needed. The latest reading on consumer prices and the latest employment report for April haven't convinced her that inflation is dropping, and the so-called core reading for CPI clocked in at 4.9%, dropping below a key level of 5%. Bowman is also weighing whether several recent regional bank failures added uncertainty to the economic outlook as credit conditions contract.
She warned against imposing new requirements that could increase their funding costs or force them to boost their capital buffers. She also pushed back against the tailoring of capital rules, or setting capital requirements based on a bank’s size. Federal Reserve governor Michelle Bowman has warned that inflation remains too high and the labor market is too tight, hinting at disagreements within the central bank’s rate-setting committee.
The Fed raised its benchmark rate May 3 by a quarter percentage point to a range between 5% and 5.25%, a 16-year high, and Fed Chair Jerome Powell suggested officials could entertain a pause at their June 13-14 meeting. Bowman said she wasn’t confident the central Bank was making enough progress slowing down economic activity and inflation even though she allowed that interest rates were now at a restrictive setting.
She urged banks to continue tightening lending standards as they face higher funding costs and fewer sources of funding following the recent banking failures. She also cautioned policy makers against moving forward with a broad revamp of the regulatory framework facing small and regional banks.
The Federal Reserve is likely to need to raise interest rates further if US price pressures don't cool off and the jobs market shows no sign of slowing, according to Governor Michelle Bowman. She expects that the policy rate will need to remain sufficiently restrictive for some time to bring inflation down and create conditions that will support a sustainably strong labor market.
Prices have climbed 4.9% from a year earlier in April, consumer price index data released Wednesday showed, the first sub-5% reading in two years. While the Fed targets a different yardstick of annual price movements, all measures are running at more than double its 2% target pace.
The Fed recently unveiled a 102-page assessment of its oversight of Silicon Valley Bank, with its bank-supervision chief calling for an extensive reevaluation of requirements for US financial firms as regulators said the failure of the lender exposed lapses in oversight.