01:08 PM EDT, 04/05/2024 (MT Newswires) -- An easing of monetary policy by the Federal Open Market Committee will be appropriate at some point, but not yet, Federal Reserve Governor Michelle Bowman said in prepared remarks Friday at the Shadow Open Market Committee Spring Meeting.

Bowman said she expects inflation to decline further, and with labor supply and demand gradually rebalancing, "it will eventually become appropriate to gradually lower the federal funds rate to prevent monetary policy from becoming overly restrictive."

"However, we are still not yet at the point where it is appropriate to lower the policy rate, and I continue to see a number of upside risks to inflation," Bowman said.

Bowman said the recent inflation improvement was due to an easing of supply chain issues that started during the pandemic, but global conflicts could reverse some of that supply improvement.

Likewise, fiscal stimulus may boost productivity capacity but may also add to inflationary pressures, Bowman said.

Housing services inflation, which was also highlighted by Chicago Fed President Austan Goolsbee on Thursday, may also keep an upward pressure on overall inflation due to tight inventory of affordable housing, driving up demand and prices for rents, Bowman said, adding that the federal funds rate may need to be higher than it was before the pandemic to keep inflation low.

"In my view, given potential structural changes in the economy, like higher investment demand relative to available savings, it is quite possible that the level of the federal funds rate consistent with low and stable inflation will be higher than before the pandemic," Bowman said. "If that is the case, fewer rate cuts will eventually be appropriate to return our monetary policy stance to a neutral level."

The FOMC should also be flexible in dealing with a resurgence of inflation, she said.

"While it is not my baseline outlook, I continue to see the risk that at a future meeting we may need to increase the policy rate further should progress on inflation stall or even reverse," Bowman said. "Given the risks and uncertainties regarding my economic outlook, I will continue to watch the data closely as I assess the appropriate path of monetary policy, and I will remain cautious in my approach to considering future changes in the stance of policy."