Prime Highlights:
Federal Reserve Governor Michelle Bowman supports recent interest rate cuts but believes December’s reduction should be the last in the current cycle.
Bowman remains concerned about inflation risks, despite recent progress.
Key Background:
Federal Reserve Governor Michelle Bowman expressed support for the recent interest rate cuts but indicated that the December reduction should mark the final step in the current easing cycle. Speaking to bankers in California on Thursday, Bowman emphasized her concerns over inflation, which remains above the Federal Reserve’s 2% target, despite the significant reduction in rates from September to December.
Bowman, known for her more hawkish stance on monetary policy, noted that while she backed the December rate cut, she believes that the policy rate is now close to a “neutral” level, which neither stimulates nor restricts economic growth. Despite the progress in reducing inflation, Bowman warned that “upside risks to inflation” remain. She pointed to the Federal Reserve’s preferred inflation gauge, which showed a 2.4% inflation rate in November, with the core measure—excluding food and energy—remaining above the 2% target at 2.8%.
While other Federal Reserve officials, including Governor Christopher Waller and regional Presidents Susan Collins and Patrick Harker, have taken a more optimistic view on inflation and suggested that further rate cuts may be appropriate, Bowman’s cautious approach reflects ongoing concerns about inflationary pressures. Waller, in particular, noted that certain price indices are contributing to higher inflation readings, even as observed prices have moderated.
Bowman also highlighted her cautious stance on loosening policy too aggressively, citing strong stock market gains and rising Treasury yields as signs that current interest rates are helping to moderate economic activity and curb inflation. While she acknowledged the progress made, she reiterated her preference for a gradual and measured approach to policy adjustments.
Her remarks come in the context of ongoing discussions within the Fed, which remains divided on the pace and scale of future rate cuts. As a permanent member of the Federal Open Market Committee (FOMC), Bowman will have a significant influence on future decisions regarding interest rates.
