Michelle Bowman of the U.S. Federal Reserve speaks at the Treasury Club meeting in Washington, DC, on February 21, 2024.
Kent Nishimura | Bloomberg | Getty Images
Federal Reserve President Michelle Bowman said Thursday that she supports recent interest rate cuts but doesn’t think further cuts are necessary.
Inflation remains “uncomfortably above” the Fed’s 2% target, Bowman said in a speech to California banking officials who are part monetary policy and part regulatory. He said his concerns about this led him to believe that the quarter-point cut in December should be the last. One is for the current cycle.
“I supported the December policy action because, in my view, it [Federal Open Market Committee’s] Bowman added that current policy rates are close to what she considers “neutral” levels that neither support nor constrain growth.
Although progress has been made, there are “upside risks to inflation,” Bowman added. The Fed’s preferred measure of inflation was 2.4% in November, but it was 2.8% excluding food and energy, a core measure that officials consider a better long-term indicator.
“Although inflation fell significantly in 2023, this progress appears to have stalled, with core inflation still uncomfortably above the committee’s 2% target last year,” Bowman said. added.
The remarks came a day after the FOMC released the minutes of its Dec. 17-18 meeting, and other members also expressed concern about the trajectory of inflation, with inflation heading towards 2%. The majority expressed confidence that they would return to the United States and eventually get there in 2027. The Federal Reserve cut all major borrowing rates from September to December.
In fact, other Fed speakers this week took a contrary view to Ms. Bowman, who is generally considered one of the committee’s more hawkish members, suggesting that she is against inflation control, including raising interest rates. This means that they prefer a more proactive approach.
Governor Christopher Waller took a more optimistic view of inflation in a speech in Paris on Wednesday, saying that while imputed or estimated prices reflected in inflation data are keeping interest rates high, observed prices are He said that this shows that the rate is moderate. He expects the Fed’s key interest rate, currently in the 4.25% to 4.5% range, “will be appropriate for further cuts.”
Earlier Thursday, Boston District President Susan Collins and Philadelphia District President Patrick Harker both expressed confidence that the Fed could cut interest rates this year, if at a slower pace than previously thought. The FOMC in December had priced in a rate cut of two quarter points this year, as opposed to the four quarter point cut expected at its September meeting.
Still, as president, Bowman is a permanent vote on the FOMC and will have a say in policy this year. She is also considered one of the top candidates to be named vice chairman of the Banking Industry Oversight Commission after President-elect Donald Trump takes office later this month.
Regarding the incoming administration, Bowman advised his colleagues not to “prejudge” what President Trump will do on issues like tariffs and immigration. Minutes from December’s meeting showed that officials were concerned about how the initiative would affect the economy.
At the same time, Bowman expressed concern that policies will become too lenient. He cited solid gains in the stock market and rising U.S. Treasury yields as signs that interest rates are suppressing economic activity and keeping inflation in check.
“Given these considerations, we continue to favor a cautious and gradual approach to policy adjustments,” he said.
