MNI BRIEF: Fed Gov Bowman Wants Measured Approach To Rate Cuts
Upside risks to U.S. inflation are still prominent, Federal Reserve Governor Michelle Bowman says.
Federal Reserve Governor Michelle Bowman on Tuesday argued for a "more measured approach" to lowering interest rates, citing upside risks to inflation and a higher neutral rate than before the pandemic. She dissented to the FOMC's decision last week to begin its rate cutting cycle with a 50 basis point move.
Lowering rates too quickly risks reigniting price pressures as businesses and consumers spending the cash they have been holding onto until rates are lower, she said in remarks prepared for the 2024 Kentucky Bankers Association. Global supply chains remain vulnerable and fiscal policy expansionary. "The upside risks to inflation remain prominent," she said. "While it has not been my baseline outlook, I cannot rule out the risk that progress on inflation could continue to stall."
"I will remain cautious in my approach to adjusting the stance of policy going forward," she said, without revealing whether she would support a cut at the November meeting. "My view continues to be that restoring price stability is essential for achieving maximum employment over the longer run. However, should the data evolve in a way that points to a material weakening in the labor market, I would support taking action and adjust monetary policy as needed while taking into account our inflation mandate." (See: MNI INTERVIEW: Fed Can Cut Gradually If Jobs Stay Strong- Kohn)