Federal Reserve Board Governor Michelle Bowman speaks during a meeting of the Treasury Club on February 21, 2024 in Washington, DC.
Kent West Village | Bloomberg | Getty Images
Federal Reserve Governor Michelle Bowman said Thursday that she supported the latest rate cut but did not believe further cuts were necessary.
In a speech to bankers in California that was as much about monetary policy as it was about regulation, Bowman said she was concerned that inflation was “disturbingly above” the Fed’s 2% target, which led her to believe that down a quarter of a percentage point in December Should be the last one in the current cycle.
“I support the December policy action because, in my view, it represents the final step in the (Federal Open Market Committee’s) policy recalibration phase,” the central banker said in prepared remarks. Bowman added , current policy rates are close to what she considers “neutral,” neither supporting nor constraining economic growth.
Bowman added that despite the progress that had been made, “there are still upside risks to inflation.” Federal Reserve’s Preferred inflation indicator November’s growth rate was 2.4%, but excluding food and energy it was 2.8%, which officials consider a better long-term indicator.
Bowman added: “Inflation fell sharply in 2023, but that progress appeared to have stalled last year, with core inflation remaining disturbingly above the Committee’s 2% target.”
The remarks came a day after the meeting FOMC releases meeting minutes The December 17-18 meeting showed that other members were also concerned about the operation of inflation, although most members expressed confidence that inflation will return to 2% and eventually achieve this target by 2027. The borrowing rate from September to December was lowered by a full percentage point.
In fact, other Fed speakers this week offered opposing views to Bowman, who is generally considered one of the more hawkish members of the committee, meaning she prefers a more aggressive approach to curbing communications. expansion, including higher interest rates.
Governor speaks in Paris on Wednesday Christopher Waller takes a more optimistic view On inflation, he said imputed or estimated prices that incorporate inflation data have kept interest rates high, while observed prices show a slowdown. He expects “further cuts” in the Fed’s key policy rate, which currently ranges from 4.25% to 4.5%.
Earlier Thursday, Boston District President Susan Collins and Philadelphia District President Patrick Harker both expressed confidence that the Fed will be able to cut interest rates this year, but at a slower pace than previously expected. The Federal Open Market Committee (FOMC) expected two quarters of interest rate cuts this year at its December meeting, and a four percentage point rate cut at its September meeting.
Still, as governor, Bowman is a permanent constituent of the FOMC and will have a say in policy this year. She is also considered one of the most likely candidates to be appointed vice chairman of banking regulations when President-elect Donald Trump takes office later this month.
Speaking of the incoming administration, Bowman advised her colleagues not to “prejudge” Trump’s possible actions on issues such as tariffs and immigration. Minutes from the December meeting showed officials expressed concern about what the moves might mean for the economy.
At the same time, Bowman expressed concern that the policy was too loose. She pointed to strong gains in stocks and rising Treasury yields as evidence that interest rates are curbing economic activity and curbing inflation.
“Given these factors, I still prefer a cautious and gradual approach to policy adjustments,” she said.
