Federal Reserve Governor Michele Bowman said she would continue to support a 75 basis point rate hike “until there is a consistent path for inflation to fall substantially,” as there is “a significant risk of high inflation for food, housing, fuel, automobiles and other essential goods into next year. He said he would continue to support a 75 basis point rate hike “until there is a consistent path forward.”The Fed Governor also noted that crypto assets “could benefit from regulatory clarity.”
Fed’s Bowman
on rate hikes, inflation, and crypto regulation.
Federal Reserve President Michelle W. Bowman addressed the U.S. economy and the Fed’s efforts to combat inflation in a speech Saturday at the 2022 CEO&Summit hosted by the Kansas Bankers Association. Bowman spoke Saturday at the Senior Managers Summit hosted by the Kansas Bankers Association.
Noting the Federal Open Market Committee’s (FOMC) decision to raise the federal funds rate by 75 basis points at its July meeting, he expressed support for the increase and the FOMC’s view that “continued increases at future meetings are appropriate.”
Emphasizing his support for “continuing to raise until we are on a consistent path to significantly lower inflation,” the Fed Governor opined.
In my view, a hike of the same magnitude should be considered until inflation is seen to be falling in a consistent, meaningful, and sustained way.
Bowman then explained her decision in favor of a 75 bps rate hike.
She noted that inflation continued to rise in June, reaching 9.1% as measured by the consumer price index. She explained that “this is another worrisome high, and the highest level in 40 years, despite many forecasters’ predictions that inflation had peaked earlier this year.” Noting that there were no “concrete signs to support this forecast,” she stated.
I need to see clear evidence of this decline before I can incorporate easing inflationary pressures into my outlook.
She then described the underlying causes of excessive inflation, including “supply chain issues, including those related to China’s Covid containment policy, housing supply constraints, ongoing conflict in Ukraine, fiscal stimulus, and limited domestic energy production.”
Citing the negative impact of rising food, housing, and energy prices on Americans, she stressed that ” She said, “It is absolutely critical that we continue to use monetary policy tools until we succeed in returning inflation to the 2% target. Bowman reiterated that the Federal Reserve has an obligation to bring inflation down to 2%, as mandated by Congress.
The Fed governor also noted that businesses are also suffering from rising inflation through higher and fluctuating input prices. He cautioned against a decline in rents in the near future, noting that this, coupled with continued inflationary risks due to high gasoline and automobile prices, would not be a problem.
He sees a significant risk of high inflation through next year for food, housing, fuel, automobiles, and other necessities of life.
Bowman also expects the conflict between Russia and Ukraine to continue, adding that the impact of halted shipments of agricultural products and restrictions on energy supplies from Russia will remain a major issue.
Governor Bowman also mentioned cryptocurrency regulation in his speech, stating.
Another area that could benefit from clearer regulation is digital assets, including stable coins and crypto assets.
“Some banks are considering expanding to a variety of crypto activities,” the Federal Reserve noted, “including custody, loans backed by crypto collateral, and facilitating the purchase and sale of these assets for customers.” In the absence of clear guidance, banks should consult with key regulators and exercise caution when engaging customers in these types of activities.”
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