US Fed official sees inflation cooling

US Federal Reserve Governor Michelle Bowman (Photo by Eric BARADAT / AFP)

WASHINGTON, D.C.: US inflation is likely to cool further while interest rates remain at current levels, a senior central bank official said on Friday, though adding that there are potential risks to this expectation.

“My baseline outlook continues to be that inflation will decline further with the policy rate held steady, but I still see a number of upside inflation risks,” said Federal Reserve (Fed) Governor Michelle Bowman in prepared remarks.

These factors include spillovers from regional conflicts which could snarl global supply chains and cause prices to rise.

Added fiscal stimulus could also fuel demand, she noted.

The Fed has held interest rates at a 23-year high in recent months, citing a lack of further progress in lowering inflation to its 2-percent target.

“In light of these risks, and the general uncertainty regarding the economic outlook, I will continue to watch the data closely as I assess the appropriate path of monetary policy,” Bowman said in remarks to a convention in Florida.

For now, she said, the central bank’s monetary policy stance “appears to be restrictive.”

But she added that she is “willing to raise the federal funds rate at a future meeting should the incoming data indicate that progress on inflation has stalled or reversed.”

On Wednesday, Fed Chairman Jerome Powell said the bank is prepared to hold rates steady for as long as appropriate.

He noted that it is likely to take longer than previously expected for policymakers to gain more confidence that inflation is moving sustainably toward their target.

But he added that it is “unlikely that the next policy rate move will be a hike.” AFP