Federal Reserve Governor Michelle Bowman mentioned Friday that it is doable rates of interest could have to maneuver larger to manage inflation, moderately than the cuts her fellow officers have indicated are seemingly and that the market is anticipating.

Noting quite a lot of potential upside dangers to inflation, Bowman mentioned policymakers have to be cautious to not ease coverage too rapidly.

“Whereas it’s not my baseline outlook, I proceed to see the chance that at a future assembly we might have to extend the coverage fee additional ought to progress on inflation stall and even reverse,” she mentioned in ready remarks for a speech to a gaggle of Fed watchers in New York. “Lowering our coverage fee too quickly or too rapidly may lead to a rebound in inflation, requiring additional future coverage fee will increase to return inflation to 2 p.c over the longer run.”

As a member of the Board of Governors, Bowman is a everlasting voting member of the rate-setting Federal Open Market Committee. Since taking workplace in late 2018, her public speeches have put her on the extra hawkish facet of the FOMC, which means she favors a extra aggressive posture towards containing inflation.

Bowman mentioned her probably final result stays that “it can ultimately turn out to be applicable to decrease” charges, although she famous that “we’re nonetheless not but on the level” of chopping as “I proceed to see quite a lot of upside dangers to inflation.”

The speech, to the Shadow Open Market Committee, comes with markets on edge in regards to the near-term way forward for Fed coverage. Statements this week from a number of officers, including Chair Jerome Powell, have indicated a cautious strategy to chopping charges. Atlanta Fed President Raphael Bostic, an FOMC voter, told CNBC he likely sees just one reduction this 12 months, and Minneapolis Fed President Neel Kashkari indicated no cuts may occur if inflation doesn’t decelerate additional.

Futures merchants are pricing in three cuts this 12 months, although it has turn out to be a detailed name between June and July for once they begin. FOMC members in March additionally penciled in three cuts this 12 months, although one unidentified official within the “dot plot” indicated no decreases till 2026 and there was appreciable dispersion in any other case about how aggressively the central financial institution would transfer.

“Given the dangers and uncertainties concerning my financial outlook, I’ll proceed to look at the info intently as I assess the suitable path of financial coverage, and I’ll stay cautious in my strategy to contemplating future adjustments within the stance of coverage,” Bowman mentioned.

Weighing inflation dangers, she mentioned that supply-side enhancements that helped deliver numbers down this 12 months could not have the identical impression going ahead. Furthermore, she cited geopolitical dangers and monetary stimulus as different upside hazards, together with stubbornly larger housing costs and labor market tightness.

“Inflation readings over the previous two months recommend progress could also be uneven or slower going ahead, particularly for core providers,” Bowman mentioned.

Fed officers will get their subsequent have a look at inflation knowledge Wednesday, when the Labor Division releases the March client worth index report.