By Howard Schneider
WASHINGTON (Reuters) – Inflation driven by the quick reopening of the U.S. economy could take “some time” to ease, Federal Reserve Gov. Michelle Bowman said on Wednesday, adding a note of caution about the durability of price increases Fed officials have largely characterized as temporary.
Fed officials since early this year have tried to prime markets and the public to expect high inflation numbers — if only because a price collapse at the start of the pandemic in early 2020 set such a low bar that even a return to normal pricing would involve a large percentage change.
“But there is more to the recent rise in inflation than just these measurement issues,” Bowman said in remarks prepared for delivery to a Cleveland Federal Reserve bank conference.
Supply chains are creaking back to life globally, and have been stretched by the strong demand for goods and services as the economy reopens.
The resulting pressure on prices “may ease as the bottlenecks are worked out, but it could take some time,” Bowman said.
She did not comment on how that view of inflation is influencing her outlook for monetary policy, either in terms of when to start reducing the Fed’s monthly $120 billion in bond purchases, or when to raise interest rates.
“I will continue to monitor the situation closely and will adjust my outlook as needed,” Bowman said.
Much of her talk was focused on community development emerging from the pandemic, and how addressing issues like the lack of broadband in rural areas and parts of some cities could improve economic opportunities.
She said the pandemic had widened disparities along gender, race, and other lines, and said she believed that government lockdowns and other economic restrictions were to blame.
“Government responses to the pandemic — the lockdowns, school closures, and economic restrictions on businesses — significantly widened differences by income, education, race, and gender, and those disparities have persisted during the recovery,” said Bowman.
The issue of whether economic restrictions were needed to protect public health as the coronavirus spread, or imposed an outsized economic cost, has been a divisive point in the country’s response to the pandemic.
(Reporting by Howard Schneider; Editing by Chizu Nomiyama)
