Additional increases in the federal funds rate will likely be required to lower inflation to the Federal Reserve’s 2% objective, Fed Governor Michelle Bowman stated in 2 speeches on Friday and today. Speaking at occasions in Colorado and Georgia, Bowman kept in mind that inflation has actually cooled considering that in 2015’s high however stays raised. Consumer costs is robust, and need for employees continues to go beyond the supply of offered task candidates, putting upward pressure on rates, she stated.
“The recent lower inflation reading was positive, but I will be looking for consistent evidence that inflation is on a meaningful path down toward our 2% goal as I consider further rate increases and how long the federal funds rate will need to remain at a restrictive level,” Bowman stated. “I will also be watching for signs of slowing in consumer spending and signs that labor market conditions are loosening.”
Bowman likewise repeated that the banking sector stays durable. “While banks have tightened lending standards in response to higher interest rates and funding costs, there have not been signs of a further sharp contraction in credit from the stress earlier this year that would slow economic activity,” she stated. “Though loan balance growth has slowed, banks have continued to increase lending to households and businesses.”