By Michael S Derby
NEW YORK (Reuters) – Federal Reserve Governor Michael Bowman said on Wednesday that if high inflation does not begin to subside, it will continue to support sharp interest rate increases to ease price pressures.
Bowman said in a text of a letter to be delivered before the rally in New York City.
The policymaker said the Fed’s rate hikes this year, which were too large for the pace of previous rate hikes, had their full support.
What happens with inflation will determine the Fed’s next move, Bowman said. “If we don’t see signs of lower inflation, my view remains that large increases in the target range for the fed funds rate should remain on the table,” she said.
But if inflation starts to subside, “I think a slower pace of rate increases would be appropriate,” Bowman said.
It also indicated that it does not see any price reductions in the future. “To bring down inflation in a steady and permanent way, the Fed funds rate will need to rise to a restricted level and stay there for some time,” Bowman said.
The central bank governor said it was “not yet clear” how much the Fed would need to increase the cost of short-term credit and how long it would need to maintain its restrictive policy stance.
Bowman spoke after the release earlier on the day of the meeting minutes from the central bank’s policy meeting in late September. Then, policy makers raised their target overnight interest rate by 0.75 percentage points, raising the federal funds rate to between 3% and 3.25%. They also made further increases as they battle the strongest inflation levels in decades.
The Fed’s projections from the September meeting saw officials put tabs on a 4.6% rate on fed funds by next year. All Fed officials were on standby for the Fed’s anti-inflation, and the meeting minutes said several officials “emphasized that the cost of taking too little action to reduce inflation may outweigh the cost of taking too much.”
Federal Reserve officials are pressing big increases even as concerns grow that their actions are adding to financial market stress and raising the risk of something happening.
Bowman also said in her comments that while the Fed has had success in the past giving guidance on monetary policy expectations, the current period is not certain enough to limit the power of that tool.
“In the current circumstances, the best we can do on the public communications front is first, to continue to reiterate our firm resolve to do what is required to restore price stability,” Bowman said.