Fed's Bowman: interest rates need to be sufficiently restrictive "for some time"

Federal Reserve Governor Michelle Bowman gives her first public remarks as a Fed policymaker at an American Bankers Association conference in San Diego

(Reuters) -The Federal Reserve should slow the pace of its rate increases in order to assess the impact of its hiking cycle but inflation remains far too high and the central bank's policy will need to be sufficiently restrictive for some time to bring it down, Fed Governor Michelle Bowman said on Thursday.

"Moderating the pace and the level of rate increases will allow us to more fully assess the effects of our...actions and the effect they are having on economic activity," Bowman said during a financial services event held in New York.

Bowman, who has been a proponent of more swift action to curb inflation than some of her rate-setting colleagues, nevertheless said that inflation data over the last month, while showing price pressures slowing slightly, "are still unacceptably high."

The personal consumption expenditures (PCE) price index, an inflation gauge the central bank watches closely, rose 0.3% in October after advancing by the same margin in September, government data showed earlier on Thursday. In the 12 months through October, the PCE price index increased 6.0% after advancing 6.3% in September.

Other inflation measures have also shown signs of slowing. The annual consumer price index increased less than 8% in October for the first time in eight months.

But Bowman said that until she sees the central bank's actions having a significant impact on price pressures, she expects to raise her estimate of where interest rates need to reach to "slightly higher" than where she had anticipated at the September meeting, when policymakers last submitted their projections for the path of rate hikes. The median Fed policymaker estimate at that meeting was 4.6%.

Once at the appropriate level, the Fed would be in no hurry to cut rates, she indicated.

"I expect that the federal funds rate will have to remain at a sufficiently restrictive level for some time in order to reduce or restore price stability, which will in turn help to create conditions for sustainably strong labor markets," Bowman said, reiterating points made by Fed Chair Jerome Powell on Wednesday.

Investors overwhelmingly anticipate the Fed to raise its policy rate by half a percentage point at its next policy meeting on Dec. 13-14, a downshift after four straight 75 basis point increases. The Fed has raised its policy rate by 375 basis points since March from near zero to a 3.75%-4.00% range.

(Reporting by Lindsay Dunsmuir; Editing by Andrea Ricci)