United States Federal Reserve Governor Michelle Bowman said on Monday that additional interest rate hikes will likely be needed to reach the Fed’s inflation target of 2%. However, she said she will monitor economic data for “evidence that inflation is on a consistent and meaningful downward path” as she considers further hikes and the length of time rates will have to stay at a restrictive level. Bowman said she also monitors the impact of inflation and high interest rates on small businesses. “Despite high inflation and significant challenges finding workers in a tight labor market, the past few years have been relatively good for small businesses and for new business formation,” she said, citing a “remarkable surge” in the number of new business start-ups starting in mid-2020. “Recent indicators, like applications for new tax identification numbers, suggest the pace remained elevated through the middle of this year,” she said.
Fed’s Barkin: Further economic slowdown ‘surely’ on the horizon
Federal Reserve Bank of Richmond President Thomas Barkin said in a speech that further economic slowdown in the United States is “almost surely on the horizon.” He explained that one of the reasons the country hasn’t yet seen a recession is the COVID-19 pandemic, the effects of which are still present in the dislocated economy. “Businesses experienced severe shortages over the last few years. So, they tell me they are holding on to workers and investing in safety stock … At the same time, consumers continue to spend, funded by excess savings,” Barkin said. He stated that Fed’s fight against inflation has already “pushed several industries into mini-recessions.” The policymaker added that as “pandemic-era fiscal support programs are ending” and monetary policy tightening works with a lag, it is likely that those who keep predicting a recession “will eventually be right.”