recessionary tendencies from permeating deeper. asian countries face a different set of challenges, though, like developed countries, they have the difficult task of striking an adequate balance between growth and inflation risks. 22. since economic growth was steadier in 2007, more immediate preoccupation of asia ’ s central bankers since july 2007 has been to deal with growing inflationary pressures. inflation rates in asia rose beyond projections and in case of inflation targeting regimes resulted in clear breaches. china and india, the two large economies, have resorted to monetary tightening, but primarily through raising cash reserve requirements by 700 bps and 350 bps since july 2007, respectively. these attempts to curb liquidity in the system and excessive demand pressures have not arrested the structural rise in prices. pakistan has been in a monetary tightening mode since april 2005 and has cumulatively raised the policy rate by 350 bps with the last two rounds of increase of 100 bps taking place after july 2007. meanwhile, other countries have held the policy rates steady. in only few cases, such as thailand and the philippines, growth risks outweighed inflation risk. consequently, policy rates were moderately lowered to ease monetary policy but with inflation creeping high, scope for loose monetary policy may no longer exist. 23. the complexity for central bankers in asia is that food inflation, with 40 - 50 % weightage in price indices, is a major driver of inflationary pressures. an excessive monetary tightening in this situation would end up creating complications for the economy without the desired impact on food inflation that is principally propelled by supply side constraints. at the same time, if monetary policy ignores stubbornly high food inflation, second round impacts would eventually strengthen the inflationary expectations. to resolve this dilemma, governments are resorting to fiscal subsidies to avoid full pass - through. high fiscal deficit countries cannot afford these subsidies and as such have resorted to a gradual and phased pass - through of rise in prices to consumers. 24. exchange rate appreciation emerging in a number of asian economies may offset some of the inflationary pressures. however this option is not available to some countries either because currencies are pegged or external current account deficits are high. given these limitations, it is best for countries to focus on fiscal consolidation to allow fiscal space for subsidies. however, this should be perceived as a short term policy response, while encouraging appropriate investments in the agriculture sector to raise productivity and improve functioning of the wholesale and retail markets under vigilance of local

for release on delivery 12 : 15 p. m. edt ( 10 : 15 a. m. mdt ) august 6, 2022 fighting inflation in challenging times remarks by michelle w. bowman member board of governors of the federal reserve system at 2022 ceo & senior management summit sponsored by the kansas bankers association colorado springs, colorado august 6, 2022 thanks to the kansas bankers association for the invitation to share my perspective on the economy and bank regulation. it is always a pleasure to be here with you for this annual gathering. i am especially looking forward to hearing what is on your minds about supervision and regulation, how you are navigating current economic conditions, and your expectations going forward. i ’ ll start with a recap of the decision from july ’ s federal open market committee meeting and then move on to my thoughts about the current economic uncertainty and challenges that lie ahead. the number one challenge, of course, is inflation, which continues to be much too high, and a heavy burden for households and businesses. as i ’ m sure you all already know, the federal open market committee decided last week to raise the federal funds rate by 75 basis points, to a range of 2¼ to 2½ percent. i will share my reasoning for supporting this increase and why i support continued increases until inflation is on a consistent path to significantly decline. i will then touch on the current federal regulatory climate and the fed ’ s agenda for supervision. inflation continued to climb in june, reaching 9. 1 percent as measured by the consumer price index. this is yet another concerningly high reading, and it set another 40 - year record high despite the expectation of many forecasters that inflation had peaked earlier in the year. i have seen few, if any, concrete indications that support this expectation, and i will need to see unambiguous evidence of this decline before i incorporate an easing of inflation pressures into my outlook. many of the underlying causes of excessive inflation are the same as they have been over the past year or so — supply chain issues, including those related to china ’ s - 2covid containment policies, constrained housing supply, the ongoing conflict in ukraine, fiscal stimulus, and limitations on domestic energy production. regardless of the source of the inflationary pressure, the federal reserve has a duty to bring inflation down to our 2 percent target. this duty is mandated by congress to carry out monetary policy that results in price stability — meaning low and stable inflation. we all understand why this