Speaking at the IMF's 2023 Annual Meeting in Marrakesh, Fed governor Michelle Bowman said inflation still has not climbed down enough from when it peaked at 9.1 per cent last summer.
The Fed has raised interest rates 11 times to its current target range of 5.25 to 5.50 per cent since March 2022 to rein in soaring consumer prices.
Headline and core inflation have both moderated since then. The Personal Consumption Expenditures (PCE) Price Index rose – the Fed's preferred inflation gauge – 3.5 per cent on an annual basis last month. Core PCE is currently at 3.9 per cent, its lowest level in two years.
“However, inflation remains well above the FOMC's 2 per cent target,” Ms Bowman said, referring to the Federal Open Market Committee, which votes on the central bank's monetary policy decisions.
The Fed governor singled out strong consumer spending and the resilient labour market as roadblocks the Fed still must overcome in its inflation battle. The economy added 336,000 jobs last month, showing that the jobs market still remains strong in the face of rising borrowing costs.
“This suggests that the policy rate may need to rise further and stay restrictive for some time to return inflation to the FOMC's goal,” Ms Bowman said.
The Fed governor's remarks in Marrakesh were toned down compared to the more hawkish stance she took in August, in which she expected several additional interest rate increases would be needed to curb inflation.
Other Fed officials have recently indicated that more rate increases will not be likely, pointing to higher Treasury yields.
Ms Bowman did not say how she might vote when the FOMC convenes later this month. The Fed skipped raising rates in its most recent meeting.