Michelle Bowman, the governor of the US Federal Reserve, speaks during the Treasury Club meeting in Washington, DC, on February 21, 2024.
Kent Nishimura | Bloomberg | Getty Images
Federal Reserve Governor Michelle Bowman said Thursday that she supports recent interest rate cuts, but doesn’t see the need to go any further.
In a speech to bankers in California that was part monetary policy, part adjustment, Bowman said that concerns she has that inflation has remained “uncomfortably above” the Fed’s 2% target lead her to believe that December’s quarter percentage point cut should be the last. one for the current cycle.
“I supported December’s policy action because, in my opinion, it represented [Federal Open Market Committee’s] the last step in the policy recalibration phase,” the central banker said in prepared remarks.
Despite the progress that has been made, there are “elevated risks to inflation,” Bowman added. The Fed’s preferred gauge of inflation showed a rate of 2.4% in November, but was at 2.8% when excluding food and energy, a key measure that officials see as a better long-term indicator.
“The rate of inflation fell sharply in 2023, but this progress appears to have stalled last year with core inflation still uncomfortably above the Committee’s 2 percent target,” Bowman added.
The remarks come a day after the FOMC released minutes from its Dec. 17-18 meeting that showed other members were also concerned with how inflation is faring, though most expressed confidence that it will return toward 2%, eventually getting there. in 2027. The Fed cut a full percentage point from its key borrowing rate from September to December.
In fact, other Fed speakers this week offered opposing views to Bowman, who is generally considered one of the committee’s more hard-line members, meaning she favors a more aggressive approach to controlling inflation. which includes higher interest rates.
In a speech in Paris on Wednesday, Gov. Christopher Waller took a more upbeat view on inflation, saying imputed or estimated prices that feed into inflation data are holding high, while observed prices are showing moderation. . He expects that “further cuts will be appropriate” in the Fed’s key policy rate, which currently stands in a range between 4.25%-4.5%.
Earlier on Thursday, regional presidents Susan Collins of Boston and Patrick Harker of Philadelphia both expressed confidence that the Fed will be able to cut interest rates this year, if at a slower pace than previously thought. The FOMC at its December meeting priced in the equivalent of two quarterly cuts this year, compared to the four expected at its September meeting.
However, as governor Bowman is a permanent voter on the FOMC and will get a say this year on policy. She is also considered one of the front-runners to be named vice chairman of banking industry oversight after President-elect Donald Trump takes office later this month.
Speaking about the incoming administration, Bowman advised her colleagues to refrain from “prejudging” what Trump might do on issues such as tariffs and immigration. The December minutes showed concerns from officials about what the initiatives could mean for the economy.
At the same time, Bowman expressed concern about easing too much politics. She cited strong stock market gains and rising Treasury yields as indications that interest rates were curbing economic activity and lowering inflation.
“In light of these considerations, I continue to prefer a cautious and gradual approach to policy adjustment,” she said.
