Fed governor expects more rate hikes to fight inflation

ISTANBUL

US Federal Reserve Governor Michelle Bowman said Monday she expects more rate hikes as the central bank continues to fight inflation.

"I expect that ongoing increases will be appropriate to bring the federal funds rate to a sufficiently restrictive level and that it will need to remain there for some time to restore price stability," she told the American Bankers Association Conference for Community Banking in Orlando, Florida.

Bowman said the outlook for the economy and inflation continues to be "highly uncertain" due to global and domestic factors, adding that she will look for macroeconomic data as evidence to see that inflation remains on a downward path when considering further interest rate increases.

"While we have seen modestly lower inflation readings in recent months, overall inflation remains high ... The ongoing tightness in the labor market puts upward pressure on inflation, even if some components of inflation moderate due to improvements in supply-side factors," she said.

While Fed Governor Christopher Waller said Wednesday that interest rates may go higher for longer than expected during the fight against inflation, Fed Chair Jerome Powell said Tuesday that inflation has been declining in the US but it still "has a long way to go."

Annual consumer inflation in the US came in at 6.5% in December, easing from 7.1% in November, while producer inflation dropped to 6.2% in December from November's 7.3%.

The latest inflation figures, for the month of January, will be released this week.

The Fed raised interest rates by a total of 425 points in seven rate hikes last year to fight record inflation which jumped to a 40-year high in mid-2022. On Feb. 1, it raised its benchmark interest rate by 25 basis points – less than December's hike of 50 basis points.

The central bank's next two-day meeting will be held on March 21-22, in which it is widely expected to make another 25 basis points of rate hike.