Washington [US], November 8 : Federal Reserve Governor Michelle Bowman reiterated her view that the central bank will need to increase the interest funds rate further to bring inflation down to its 2 per cent target.
"We have seen considerable progress on lowering inflation, but inflation remains high and recent readings have been uneven," Bowman said at the 2023 Ohio Bankers League "Main Event," Columbus, Ohio on Tuesday (local time), excerpts of which were made available on the Fed's website.
Consumer inflation in the US was 3.7 per cent year-on-year in September, quite above its central bank's 2 per cent aim.
"...some components of core services inflation have picked up, and I see a continued risk that core services inflation remains stubbornly persistent. In my view, there is also a risk that higher energy prices could reverse some of the progress made to bring overall inflation down," she said, explaining the rationale behind her view on the further need for monetary policy tightening.
After sharply tightening monetary policy over the past year and a half to reduce inflation, the Federal Open Market Committee (FOMC) voted to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 per cent.
Last week, the US Federal Reserve kept the key policy rate unchanged for the second straight time at 5.25-5.50 per cent.
"...I supported the FOMC's decision last week to hold the target range for the federal funds rate at the current level as we continue to assess incoming information and its implications for the outlook," Governor Bowman added.
She added she was willing to support raising the federal funds rate at a future meeting, should the incoming data indicate that progress on inflation has stalled or is insufficient to bring inflation to 2 per cent in a timely way.
"Returning inflation to the FOMC's goal is necessary to achieve a sustainably strong labour market and an economy that works for everyone," said the Governor.
Barring the latest pause, the US central bank had hiked the interest rate on 12 occasions, necessitated in the fight against soaring inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.
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