Fed's Bowman: need steady policy rate 'for some time' to beat inflation

By Ann Saphir

(Reuters) -U.S. Federal Reserve Governor Michelle Bowman on Tuesday reiterated her view that holding the policy rate steady "for some time" will probably be enough to bring inflation under control, but also repeated her willingness to raise borrowing costs if needed.

"Inflation in the U.S. remains elevated, and I still see a number of upside inflation risks that affect my outlook," Bowman said in remarks prepared for delivery in London.

During a question and answer session following her speech, Bowman concurred when asked to confirm she had not penciled in any reduction in borrowing costs for the rest of this year.

"Yes, that is still my view. I have not written in further rate cuts in my statement of economic projections for the bulk of this year," Bowman said, referring to the forecasts Fed officials each anonymously gave at the central bank's latest policy meeting earlier this month.

"I have shifted those into future years ... right now with the uncertainty of the economic outlook and what the data is telling us, we are in a good place right now to understand how that might evolve."

Supply-chain improvements and a surge in labor supply from immigration, both of which helped push down inflation last year, are unlikely to continue, she said. Regional conflicts could put upward pressure on energy and food prices; looser financial conditions or fiscal stimulus could stoke inflation as well, she said.

Immigrants' housing needs, along with continued labor-market tightness, could also push up on prices, she said.

"Should the incoming data indicate that inflation is moving sustainably toward our 2% goal, it will eventually become appropriate to gradually lower the federal funds rate to prevent monetary policy from becoming overly restrictive," she said.

However, Bowman said, the economy is "not yet" at that point, adding that she will "remain cautious" in her approach to monetary policy, and predicted that central banks in other countries may loosen policy sooner or more quickly than the Fed.

Bowman is one of the Fed's most hawkish voices, and her remarks on Tuesday were no exception.

The Fed earlier this month kept the policy rate in the 5.25%-5.5% range where it has remained since last July. Fresh projections showed no Fed policymaker expected to raise rates from here, and their median prediction was for just one rate cut before the end of the year.

"Looking ahead, I will be closely watching the incoming data as I assess whether monetary policy in the U.S. is sufficiently restrictive to bring inflation down to our 2% goal over time," Bowman said.

So far this year there has been just "modest further progress" on inflation, she said. "I expect inflation to remain elevated for some time."

(Reporting by Ann Saphir; Additional reporting by Lindsay DunsmuirEditing by Matthew Lewis and Tomasz Janowski)