Fed’s Bowman wants 75 bps hike in July, ‘at least’ 50s after that

Federal Reserve Governor Michelle Bowman on Thursday signaled support for a more aggressive path of rate hikes than most of her fellow central bankers currently contemplate, saying she wants rates to rise until they exceed near-term inflation expectations.

“Based on current inflation readings, I expect that an additional rate increase of 75 basis points will be appropriate at our next meeting as well as increases of at least 50 basis points in the next few subsequent meetings, as long as the incoming data support them,” Bowman said in remarks prepared for delivery to Massachusetts Bankers Association conference. “Depending on how the economy evolves, further increases in the target range for the federal funds rate may be needed after that.”

Bowman’s surprisingly hawkish remarks were released as Fed Chair Jerome Powell was fielding lawmaker questions about inflation and a possible recession for a second day on Capitol Hill.

They come little more than a week after the Fed raised rates by 75 basis points, to a target range of 1.5%-1.75%, and published forecasts showing most policymakers expect rates to need to rise to 3.4% by the end of the year.

Calling inflation a threat to sustained job growth, Bowman said she is “committed to a policy that will bring the real federal funds rate back into positive territory,” and said it “doesn’t make sense” for the policy rate to be below near-term inflation expectations.

One gauge of near-term inflation expectations is University of Michigan’s one-year ahead reading, which ticked up to 5.4% in June.

Inflation itself is running more than three times the Fed’s 2% target.

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