(Washington) A governor of the American central bank (Fed) estimated Tuesday that a new rate increase could be necessary to curb inflation, if it does not slow down enough in the coming months.
“I still expect that we will have to raise rates further to bring inflation back to our 2.0% target,” said Michelle Bowman, a member of the Board of Governors of the Fed, during a conference before bankers in Columbus, Ohio.
She said she was “ready to support” such action “at a future meeting if available data indicate that progress on inflation has stalled or is insufficient to bring inflation back to 2.0 %”.
Inflation stood at 3.4% annualized in September, according to the PCE index, favored by the Fed.
At the end of its monetary policy meeting on 1er November, the Fed nevertheless kept rates in the range of 5.25 to 5.50% in which they have been since July, for the second meeting in a row, after eleven increases since March 2022.
Mme Bowman nevertheless stressed that he “supported” this decision and judged that the rate “seems restrictive”, that is to say that it slows down economic activity.
“We have seen considerable progress in reducing inflation, but it remains high and recent figures are uneven,” said the Fed Governor.
She also warned of “an ongoing risk that services inflation remains persistent”, and that “rising energy prices are reversing some progress made in reducing inflation”.
All the more, she specified, that “financial conditions have tightened since September”, stressing that “part of this tightening has occurred thanks to long-term bond yields”, which have risen sharply .
“We do not yet know the effects of tightening financial conditions on economic activity and inflation,” said Michelle Bowman, also reporting “an unusually high level of uncertainty”.
In the United States, however, economic data shows solid economic growth and a still strong job market. And “supply and demand in the labor market could be better balanced”, while the country has been experiencing a significant labor shortage for more than two years.
The next Fed meeting is scheduled for December 12-13. It will be accompanied by an update of economic forecasts.