Inflation should continue to decline even as the U.S. central bank holds its benchmark interest rate steady at current levels, Federal Reserve Governor Michelle Bowman said on Friday while also reiterating her willingness to raise the policy rate if progress peters out or reverses.

"My baseline outlook continues to be that inflation will decline further with the policy rate held steady, but I still see a number of upside inflation risks that affect my outlook," Bowman said in prepared remarks for a speech to a banking conference in Key Biscayne, Florida.

"While the current stance of monetary policy appears to be at a restrictive level, I remain willing to raise the federal funds rate at a future meeting should the incoming data indicate that progress on inflation has stalled or reversed," Bowman added.

In her speech, Bowman made clear she expects inflation to remain elevated for some time, highlighting a number of factors that could keep it from falling back to the Fed's 2% goal.

Those include a lack of further supply-side improvements such as last year's healing of supply chains, lower energy prices and increased immigration, all of which helped put downward pressure on inflation.

Bowman also cited risks from spillovers from conflicts abroad as well as a recent loosening in financial conditions, which could cause inflation to re-accelerate

And at a time when Fed officials are keenly focused on the persistence of stronger-than-expected housing inflation, Bowman proposed a potential new wrinkle in the expectation that those pricing pressures will abate.

"Given the current low inventory of affordable housing, the inflow of new immigrants to some geographic areas could result in upward pressure on rents, as additional housing supply may take time to materialize," Bowman said.

(Reporting by Lindsay Dunsmuir; Editing by Paul Simao)