Economy
Fed’s Bowman says she still expects another interest rate hike
© Reuters. FILE PHOTO: U.S. Federal Reserve Governor Michelle Bowman poses at a conference on monetary policy at The Hoover Institution in Palo Alto, California, U.S., May 3, 2019. REUTES/Ann Saphir/File Photo
(Reuters) – The U.S. central bank will likely need to raise borrowing costs further in order to bring inflation back down to its 2% target over a reasonable period, Federal Reserve Governor Michelle Bowman said on Tuesday.
“My baseline economic outlook continues to expect that we will need to increase the federal funds rate further to keep policy sufficiently restrictive to bring inflation down to our 2% target in a timely way,” Bowman said in prepared remarks to a banking association in Salt Lake City, Utah.
Earlier this month, the Fed kept its benchmark overnight lending rate unchanged in the 5.25%-5.50% range for the second consecutive policy meeting.
Since then, Fed Chair Jerome Powell has signaled that while the central bank stands prepared to raise interest rates again, it would only do so if progress on getting inflation back to the 2% target falters.
However, Bowman has repeatedly been among a small minority of policymakers who have said they don’t think the Fed’s job is yet done.
By the Fed’s preferred measure, inflation fell to 3.4% in September, down from a peak of 7.1% last summer, and other Fed policymakers have pointed out that they still expect it will take more time for the full impact of the rise in borrowing costs over the past 20 months to filter through the economy.
Bowman, for her part, is less certain that will be enough, noting that inflation remains high and progress “uneven” and outlining in her remarks the “unusually high level of uncertainty” on the economic outlook.
It remains unclear whether a further easing of goods and labor supply will continue to lower inflation, given greater spending among consumers, higher energy prices, and possible new labor shortages in the next few years tied to the trend of bringing more manufacturing back from abroad, Bowman said.
Likewise, some signs of interest rate insensitivity among businesses could dull the effects of tighter monetary policy and financial conditions on economic activity and inflation, Bowman said, and overall longer-term economic conditions might mean the Fed’s policy rate may need to be higher than pre-pandemic norms.
“In my view, given potential structural changes in the economy, such as higher demand for investment relative to saving, it is quite possible that the level of the federal funds rate consistent with low and stable inflation will be higher than before the pandemic,” Bowman said.
Earlier on Tuesday, Fed Governor Christopher Waller said he is “increasingly confident” the central bank’s current policy setting will prove enough to return inflation to the Fed’s target.
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo
SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.
With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.
The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.
China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.
The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.
“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.
The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.
($1 = 7.1315 renminbi)
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
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