US Fed official says more rate hikes necessary

WASHINGTON: A senior US Federal Reserve official said Thursday that additional interest rate hikes are needed to tackle historically high inflation.

“I believe that additional policy rate increases will be necessary to bring inflation down to our target over time,” Fed governor Michelle Bowman told a conference in Cleveland, Ohio, on Thursday morning, according to prepared remarks.

The Fed paused its aggressive campaign of monetary tightening last week after raising its benchmark lending rate 10 times in a row in just over a year to tackle inflation, which remains stubbornly above the its long-term target of two percent.

The Fed’s benchmark now sits in a range between 5.0 and 5.25 percent — its highest level since 2007. Bowman, who is a voting member of the Fed’s rate-setting committee, said she had supported the committee’s decision last week to hold interest rates in the face of mixed economic data.

Bowman said the bank’s tighter monetary policy “has had some effect on economic activity and inflation to date.” But she added that, while inflation has declined substantially, “it remains far too high.”

“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,” she said.

While the decision to hold rates last week was unanimous, almost all members of the Federal Open Market Committee (FOMC) predicted that the bank will have to raise its benchmark further before the end of the year.

“We are committed to getting inflation under control and strong majority of the committee feels that we’re close, but there’s a little further to go with rate hikes,” Fed Chair Jerome Powell told Senators on Capitol Hill on Thursday morning.

He added that “a strong majority” of FOMC members felt the Fed will need to raise rates twice more before the end of the year, assuming the economy performs as expected.