The US Federal Reserve has made "considerable progress" in lowering inflation in the past 18 months, but it remains "too high," warranting further interest rate hikes, according to Fed Governor Michelle Bowman.
Bowman, speaking at a conference in Colorado on Friday, said that she expects the Fed's rate-setting committee to raise interest rates "at a restrictive level for some time" in order to bring inflation down to the Fed's long-term target of 2%.
The Fed has raised interest rates 11 times since March 2022, bringing the federal funds rate to its highest level in 22 years. However, inflation has remained stubbornly above the Fed's target, reaching a 40-year high of 9.1% in June.
In recent months, inflation has crept up again due to a spike in energy costs. Bowman said that she sees a "continued risk that energy prices could rise further and reverse some of the progress we have seen on inflation in recent months."
"We should remain willing to raise the federal funds rate at a future meeting if the incoming data indicates that progress on inflation has stalled or is too slow," she added.
Bowman's comments suggest that the Fed is prepared to continue raising interest rates aggressively, even if it means causing a recession, in order to bring inflation under control.
Bowman's comments are likely to be bearish for stock prices, as higher interest rates make it more expensive for businesses to borrow money and invest. However, the comments are likely to be positive for bond prices, as higher interest rates make bonds more attractive to investors.
