(Finance) – “At present, ours monetary policy orientation is restrictive and appears to be adequately calibrated to reduce inflationary pressures”. Michelle Bowmanwho sits on the Board of Governors of the Federal Reserve, at an event in Miami, Florida, explaining that his forecast is that “inflation will decline further with the policy rate held stable, but I still see a number of inflation risks upwards that influence my outlook.”
These – he explained – include “risks arising from geopolitical developments, including the risk of spillovers arising from geopolitical conflicts and the extent to which food and energy markets and supply chains remain exposed to such influences. There is also the risk that a easing financial conditions and further fiscal stimulus could boost demand, blocking any further progress or even causing a reacceleration of inflation.Finally, there is a risk that continued labor market tension could lead to core services inflation persistently high, as illustrated by the pick-up in 12-month core services inflation in January Labor market data suggests continued high wage growth as some businesses continue to report above-average wage increases to offset high prices and high inflation.”
Given these risks and overall uncertainty about the economic outlook, “I will continue to watch the data closely as I evaluate the appropriate path of monetary policy,” Bowman said. “The frequency and scope of data revisions over the past few years, as from the latest jobs report, make the task of assessing the current state of the economy and predicting how the economy will evolve even more challenging, and I will remain cautious in my approach when considering future changes in political position“.
“If incoming data continues to indicate that inflation is moving sustainably towards our 2% target, it will eventually become appropriate to gradually lower our policy rate to prevent monetary policy from becoming overly restrictive,” he added. In my opinion we are not at that point yet. Reducing our policy rate too soon could result in the need for further increases in the future of the official rate to bring inflation back to 2% in the long term”.
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