The Federal Open Market Committee’s economic projections and forecasts for the federal-funds rate may be published anonymously, but some members have started to telegraph where they stand this week.
The latest, governor Michelle Bowman, outed herself on Thursday as part of the majority of FOMC members who believe additional rate hikes will be needed to bring down inflation to the Fed’s target of 2%. The latest readings from the consumer price index and the personal-consumption expenditures price index, the Fed’s preferred...
Michelle Bowman’s comments closely mirror testimony to Congress this week by Chairman Jerome Powell.
Eric Baradat/AFP via Getty Images
The Federal Open Market Committee’s economic projections and forecasts for the federal-funds rate may be published anonymously, but some members have started to telegraph where they stand this week.
The latest, governor Michelle Bowman, outed herself on Thursday as part of the majority of FOMC members who believe additional rate hikes will be needed to bring down inflation to the Fed’s target of 2%. The latest readings from the consumer price index and the personal-consumption expenditures price index, the Fed’s preferred inflation measure, show price growth still roughly twice as high as the target rate.
During its June meeting, the FOMC didn’t deviate from the widely expected move to skip a rate hike to study how the tight monetary environment is playing out. But officials simultaneously indicated they will likely implement not one, but two more quarter-point hikes from the current level of 5% to 5.25%.
The latest forecasts—which are illustrated by an anonymous dot on a chart—show officials believe the median federal-funds rate will hit 5.6% by the end of 2023, up from an expected 5.1% in March, according to the Fed’s updated Summary of Economic Projections.
“I supported the FOMC’s decision last week to hold the federal-funds rate target range steady and to continue to reduce the Fed’s securities holdings; however, I believe that additional policy rate increases will be necessary to bring inflation down to our target over time,” Bowman said Thursday during an event at the Federal Reserve Bank of Cleveland.
The Fed’s previous 10 consecutive rate increases have proven effective in dampening economic activity and inflation, Bowman acknowledged. But it isn’t enough, she said, noting core inflation—which excludes more volatile food and energy prices—has essentially plateaued since the fall of 2022. That indicates there is more work to do to durably bring inflation down, Bowman added.
Bowman’s comments closely mirror testimony to Congress this week by Chairman Jerome Powell, who told members of the House Financial Services Committee on Wednesday the Fed had a “long way to go” on inflation and the updated forecast was a “pretty good guess of what will happen if the economy performs about as expected.”
In the opposite camp, Atlanta Fed President Raphael Bostic wrote Wednesday he believes the current monetary policy is sufficiently restrictive, and advocated for the Fed to pause and give policy time to work.
“I think we are in a place where we should let the hard work the Committee has already done work its way through the economy and see if it continues to bring inflation closer to our goal,” Bostic said. “Letting restrictive policy work for a while is prudent.”
One thing all Fed officials agree on: Closely monitoring the U.S. economic situation and employing a data-driven, flexible approach.
“I will continue to monitor the incoming data and to look for signs that inflation is on a consistent downward path as I consider appropriate monetary policy at future meetings,” Bowman said.
Write to Megan Leonhardt at megan.leonhardt@barrons.com