Michelle Bowman, Governor of the US Federal Reserve, speaks at a meeting of the Treasury Club in Washington, DC, February 21, 2024.
Kent Nishimura | Bloomberg | Getty Images
Federal Reserve Governor Michelle Bowman said Thursday she supports recent interest rate cuts but doesn’t see a need to go further.
In a speech to bankers in California that was part monetary policy, part regulation, Bowman said her concerns about inflation holding “uncomfortably above” the Fed’s 2% target led her to believe that the quarter-percentage-point decline in December should be the last. one for the current cycle.
“I supported the December political action because, in my opinion, it represented [Federal Open Market Committee’s] The final step in the policy recalibration phase,” the central bank governor said in prepared remarks. Bowman added that the current policy rate is close to what she considers a “neutral” rate that neither supports nor constrains growth.
Despite the progress, there are “risks of rising inflation,” Bowman added. The Fed’s preferred measure of inflation came in at 2.4% in November, but excluding food and energy it was 2.8%, the main measure officials consider the best long-term indicator.
“The rate of inflation fell significantly in 2023, but that progress appears to have stalled last year with core inflation still above the committee’s 2 percent target,” Bowman added.
The statements came a day after the FOMC released minutes from its Dec. 17-18 meeting that showed other members were also concerned about how inflation was developing, although most expressed confidence that it would return to the 2% target and eventually will reach it in 2027. From September to December, the Fed cut its key borrowing rate by a full percentage point.
In fact, other Fed officials speaking this week offered views opposite to those of Bowman, who is generally seen as one of the committee’s more hawkish members, meaning she favors a more aggressive approach to controlling inflation that includes higher interest rates.
In a speech Wednesday in Paris, Gov. Christopher Waller was more optimistic. on inflation, stating that the imputed or estimated prices that are included in inflation data keep rates high while observed prices show moderation. He expects “further cuts would be appropriate” for the Fed’s key interest rate, which is currently in the 4.25%-4.5% range.
Earlier Thursday, regional presidents Susan Collins of Boston and Patrick Harker of Philadelphia expressed confidence that the Fed could cut rates this year if it was at a slower pace than previously expected. The FOMC at its December meeting estimated a rate cut of two-quarters of a point this year, down from the four expected at its September meeting.
However, as governor, Bowman is a regular voter on the FOMC and will have a vote on policy issues this year. She is also considered a favorite to become vice chair of banking oversight when President-elect Donald Trump takes office later this month.
Speaking about the new administration, Bowman advised her colleagues to refrain from making “prejudgments” about what Trump might do on issues such as tariffs and immigration. The December minutes indicate officials are concerned about what the initiatives could mean for the economy.
At the same time, Bowman expressed concern about easing policy too much. She cited strong stock market gains and rising Treasury yields as indicators that interest rates are holding back economic activity and lowering inflation.
“In light of these considerations, I continue to favor a cautious and gradual approach to policy adjustments,” she said.