Federal Reserve (Fed) Board of Governors member Michelle W. Bowman cautioned that there is a real risk that inflation could remain elevated for much longer than many are anticipating. Fed Board member Bowman outlined a far more cautious approach to the Fed’s current inflation outlook during a speech at the Massachusetts Bankers Association Annual Convention in Key Biscayne.
Key highlights:
- It remains unclear whether further supply-side improvements will continue to lower inflation.
- Monetary policy appears to be restrictive.
- Bowman sees several upside inflation risks in outlook.
- Continues to hold that inflation should slowly move lower as long as policy holds.
- Remains willing to raise rates further if data shows inflation progress has stalled or reversed.
- Expects inflation to remain elevated for some time.
- The extent of data revisions in the past few years makes assessing the economy even more challenging.
- Geopolitical developments remain a key upside risk to inflation.
- Too-loose financial conditions remains a risk, fiscal stimulus could drive demand higher, stalling or even reversing inflation progress.
- There remains a high risk that consumer, more immigration, and tight labor market conditions could lead to persistently high inflation.
