Fed governor says more rate hikes 'necessary' to lower inflation

ISTANBUL

US Federal Reserve Governor Michelle Bowman said Thursday that additional interest rate increases will be "necessary" to bring inflation down to the central bank's 2% target.

"The FOMC has rapidly increased the federal funds rate to bring demand into better balance with supply. But while headline inflation has declined substantially, it remains far too high. Therefore, I believe there is more work to do to bring inflation down," she said in a plenary session at the Policy Summit 2023 hosted by the Federal Reserve Bank of Cleveland.

The Fed last week skipped an interest rate increase at the conclusion of its two-day meeting, as widely expected, but the bank's latest projections indicate two more rate hikes by 25 basis points each are possible for the rest of this year.

While annual consumer inflation came in at 4% in May, the lowest in more than two years and softening from 4.9% in April, producer prices annually eased to 1.1% in May -- a significant slowdown from April's annual gain of 2.3%.

"Although tighter monetary policy has had some effect on economic activity and inflation to date, we have seen core inflation essentially plateau since the fall of 2022, and I expect that we will need to increase the federal funds rate further to achieve a sufficiently restrictive stance of monetary policy to meaningfully and durably bring inflation down," Bowman explained.