US Fed Governor Bowman says another "similarly-sized" rate hike needed to contain inflation

Colorado [US], August 8 : The US Federal Reserve Governor Michelle W. Bowman said another "similarly-sized" - 75 basis points -- increase in key interest rates should be on the table until the economy sees inflation declining in a "consistent, meaningful, and lasting way".
Bowman made the remarks while addressing the 2022 CEO and Senior Management Summit sponsored by the Kansas Bankers Association in Colorado on Saturday.
Many of the underlying causes of excessive inflation, Bowman said, are the same as they have been over the past year such as supply chain issues, including those related to China's COVID containment policies, constrained housing supply, the ongoing conflict in Ukraine, fiscal stimulus, and limitations on domestic energy production.
"Regardless of the source of the inflationary pressure, the Federal Reserve has a duty to bring inflation down to our 2 per cent target," Bowman said. The Governor believes the supply problems pushing up inflation likely to persist.
In the backdrop of an over four-decade high inflation in the country, the US Federal Open Market Committee had in its latest meeting raised the key policy interest rate by 75 basis points to 2.25-2.50 per cent, anticipating that the increase in the interest rates will be "appropriate".
Hiking interest rates typically cool demand in the economy, thereby putting a brake on the inflation rate.
The US Federal Reserve in its June meeting too raised the interest rate by 75 basis points, which was the steepest hike since 1994.
US Federal Reserve Chair Jerome Powell in his remarks after the recent monetary policy meeting said another "unusually large increase" in rates could be appropriate at the next meeting, provided that that will depend on the data the US Fed gets in between.
Real gross domestic product (GDP) in the US decreased at an annual rate of 0.9 per cent in the second quarter of 2022 (April-June), marking the second consecutive quarter of degrowth which qualifies for a technical recession.
In the January-March quarter, real GDP decreased 1.6 per cent, US Bureau of Economic Analysis data showed.
A technical recession is often defined in which there have been two consecutive quarters of negative growth in the real GDP.
But, US President Joe Biden maintained that the country's economy was not heading into a recession.
"My hope is we go from this rapid growth to steady growth so we will see some coming down, but I don't think we are going to...god willing I don't think we are going to see a recession," Biden told reporters earlier.