Fed Governor Michelle Bowman acknowledged in a speech the progress made in curbing inflation. However, she quickly pointed out “inflation remains well above the FOMC’s 2 percent target.”
She highlighted the robust pace of domestic spending and the prevailing tightness in the labor market. These factors indicate that “the policy rate may need to rise further and stay restrictive for some time to return inflation to the FOMC’s goal.”
Shifting her attention to the broader challenges faced by central banks, she elucidated, “As they have confronted price stability challenges, central banks have also faced new financial stability risks.”
Specifically, she cited concerns related to the substantial fluctuations in interest rates amidst an environment characterized by sustained, heightened inflation.
Moreover, Bowman emphasized the potential risks arising from geopolitical tensions, explaining how they can instigate “greater financial market volatility.” She also underscored the indirect impacts such tensions could have, including influencing economic activity and inflation.
