Home Uncategorized Fed’s Bowman keeps an open mind on possible March half-percentage-point rate hike

Fed’s Bowman keeps an open mind on possible March half-percentage-point rate hike

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Feb 21 (Reuters) – Federal Reserve Governor Michelle Bowman said on Monday she would assess incoming economic data over the next three weeks to decide whether a half-point interest rate hike percent at the next central bank meeting in March was needed, a stance that underscores divisions among policymakers over how aggressively to begin its tightening cycle.

“Like all of my colleagues will also, I will be watching the data closely to judge the appropriate size of an increase at the March meeting,” Bowman said during remarks at a conference of the American. Bankers Association in Palm Desert, California. “I intend to support swift and decisive action to reduce inflation.”

In a question-and-answer session following his speech, Bowman said it was “very important that we continue to monitor developments in the economy and understand if things are improving or getting worse. as we get closer to that decision.”

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Ahead of the next meeting, there will be another inflation report and monthly jobs figures for the central bank to digest as policymakers also keep tabs on escalating geopolitical tensions amid fears Russia will invade. Ukraine.

Bowman’s firmly open mind at the March 15-16 policy meeting is at odds with some other senior Fed officials at the heart of the Fed’s rate-setting arm, who in comments last week , pushed back against growing market expectations of a possible bigger initial hike of half a percentage point above normal to help kick off a campaign to contain inflation at its highest level in 40 years. Read more

Investors are currently seeing an 83% chance of a quarter percentage point rate hike next month. St. Louis Fed Chairman James Bullard initially urged the market to adopt a more aggressive strategy after calling on the Fed 11 days ago to hike rates a full percentage point by its meeting. of June, a rate trajectory that would require at least a half-point hike by then. Read more

In her speech, Bowman also said she expects further rate increases will be needed in the coming months, consistent with her view that “far too high” inflation will not start to set in. moderate before the second half of this year. She noted that there is a significant risk that price pressures will persist.

Elsewhere, she called for the Fed’s balance sheet to be reduced to an appropriate and manageable level to help bring inflation down, but as with rate hikes, for now, she remains dependent on calendar data.

“Beyond this spring, my view on the appropriate pace of interest rate increases and balance sheet reduction for this year and beyond will depend on how the economy plays out,” Bowman said.

Fed Chairman Jerome Powell, who has been silent since January, will likely provide an update on his own thoughts when he appears before Congress on March 2-3, where he will provide an update on the economic outlook.

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Reporting by Lindsay Dunsmuir; Editing by Andrea Ricci

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