MNI: Bowman Says Could Become Appropriate For Fed To Cut Rates

Federal Reserve Governor Miki Bowman on Monday said inflation could continue to decline and flagged the potential to begin cutting interest rates at some point to prevent overly tight policy.

"My view has evolved to consider the possibility that the rate of inflation could decline further with the policy rate held at the current level for some time," said Bowman in prepared remarks. "Should inflation continue to fall closer to our 2 percent goal over time, it will eventually become appropriate to begin the process of lowering our policy rate to prevent policy from becoming overly restrictive," said Bowman, known for being on the hawkish end of the Fed spectrum.

She cautioned against expectations for cuts in the near-term. "We are not yet at that point. And important upside inflation risks remain." (See: MNI INTERVIEW: Fed Could Cut More Than SEP Anticipates)

Bowman noted a number of risks and the general uncertainty regarding the economic outlook. "I will remain cautious in my approach to considering future changes in the stance of policy," she said. Bowman left open the possibility of raising the federal funds rate further at a future meeting should data indicate progress on inflation has stalled or reversed.

Recent progress on lowering inflation reflects a restrictive Fed policy stance, she told the South Carolina Bankers Association, with the most recent 12-month total and core PCE inflation readings through November at 2.6 and 3.2%. Employment data continue to show signs of a tight labor market, she added.