The Federal Reserve is focused on reducing inflation so as to support a growing economy and rising incomes, Fed Governor Michelle Bowman said on Thursday, adding that the strong labor market has made it hard for growing businesses to find workers. “We want to hear how inflation, along with the higher interest rates needed to bring inflation down, is affecting you and your communities,” Bowman said in remarks prepared for delivery at the start of a “Fed Listens” event in Odessa, Texas convened to elicit stories about how everyday lives are impacted by Fed policy. “These conversations provide important context to the economic data that we consider, and they help guide our thinking about how we can best achieve stability and support for the economic well-being of all Americans.” The Fed has raised interest rates sharply over the past year, and recently has signaled it may stop raising rates soon but leave them high for a while to keep pushing down on inflation. Bowman did not make any specific comments on her view of the appropriate rate path in her brief remarks. The Fed’s next policy-setting meeting is May 2-3
Fed’s Logan Says Inflation Has Been Much Too High
Federal Reserve Bank of Dallas President Lorie Logan on Thursday outlined what she’s looking for to show the US central bank has made enough progress in its battle to cool price pressures. “As you surely know, inflation has been much too high,” Logan said in opening remarks to a Fed Listens event in Odessa, Texas. “The Fed has raised interest rates by 4.5 percentage points over the past year to bring the economy into better balance.” Logan said she’s looking for sustained improvement in inflation statistics, an economy that’s evolving as forecast and a change in the factors underlying inflation, including a hot labor market and imbalance in supply and demand. The Dallas Fed chief, whose remarks were brief and didn’t touch on her outlook for the economy or monetary policy, also said she’s been looking at the impact of banking sector stresses on the broader economy. Logan is a voter on this year’s policy-setting Federal Open Market Committee. Fed Governor Michelle Bowman also delivered brief remarks at the event, held at Odessa College, and likewise avoided any explicit policy comment. “Lately, as you know, the Fed has been focused on lowering inflation, which is essential if we want to support a growing economy and rising incomes,” Bowman said. The US central bank has raised rates at a fast clip over the past year, bringing the benchmark interest rate to a target range of 4.75%-5%. Market participants expect policymakers to deliver one more 25 basis-point hike, at their May 2-3 meeting, before pausing. Fed officials have said they’re closely watching the tightening of lending conditions following the collapse of Silicon Valley Bank in March and the ensuing financial-market turmoil.
Fed’s Mester sees policy rate over 5%
Cleveland Federal Reserve President Loretta Mester said on Thursday the U.S. central bank still has more interest rate increases ahead of it, while noting the aggressive move to boost the cost of borrowing over the last year to quash high inflation is nearing its end. “Demand is still outpacing supply in both product and labor markets and inflation remains too high,” Mester said in a speech to the Akron Roundtable, a community forum in Akron, Ohio. Change in financial conditions “would work in the same direction as tighter monetary policy,” which the Fed will need to take stock of “to help us calibrate the appropriate path of monetary policy going forward.” Mester said she expects the unemployment rate, which is currently 3.5%, to rise to between 4.5% and 4.75%. She sees inflation, which was running at a 5% clip on a year-over-year basis in February based on the Fed’s preferred measurement, easing to 3.75% this year and hitting the central bank’s 2% target in 2025. In response to an audience question after her formal remarks, Mester said she believes the U.S. is likely to escape a recession, even as growth probably cools quite a bit as a result of Fed policy actions. “The ‘soft landing,’ of course, is what we’re aiming for,” Mester said, referring to a scenario in which monetary tightening slows the economy, and inflation, without triggering a recession. “In this environment, I do think we’re going to have very slow growth – I think growth will be well below 1%.” With activity that tepid, it would be skirting outright contraction, Mester said. But even if a recession happens, she said she does not believe it would be a deep one amid an otherwise resilient economy. “In order to put inflation on a sustained downward trajectory to 2%, I anticipate that monetary policy will need to move somewhat further into restrictive territory this year, with the fed funds rate moving above 5% and the real fed funds rate staying in positive territory for some time,” Mester said, referring to the central bank’s benchmark overnight interest rate. But she also noted that supply imbalances in the economy are on the mend, and with the cumulative impact of Fed rate rises weighing on the economy, “we are much closer to the end of the tightening journey than the beginning.” Mester added what happens next with rates will depend on the economy