Michelle Bowman, Governor of the US Federal Reserve, speaks during a Treasury Club meeting in Washington, D.C., on February 21, 2024.
Kent Nishimura | Bloomberg | Getty Images
Federal Reserve Governor Michelle Bowman said Thursday that she supports the recent interest rate cuts but does not see a need to go further.
In a speech to California bankers that was part monetary policy, part regulatory, Bowman said her concerns that inflation had remained “uncomfortably higher” than the Fed’s 2% target led her to believe a quarter-point cut would be necessary. In December it should be the last one for the current session.
“I supported the policy action taken in December because, in my view, it represents (the Federal Open Market Committee's) final step in the policy reset phase,” the central bank governor said in prepared remarks. Bowman added that the current interest rate is close to what she believes is “neutral” and neither supports nor restricts growth.
Bowman added that despite the progress that has been made, there are “upside risks to inflation.” The Fed's preferred measure of inflation showed a rate of 2.4% in November but was at 2.8% excluding food and energy, a core measure that officials see as a better long-term indicator.
“Inflation fell significantly in 2023, but this progress appears to have stalled last year as core inflation remains uncomfortably above the committee’s 2 percent target,” Bowman added.
The comments come a day after the Federal Open Market Committee released minutes from its December 17-18 meeting, which showed that other members were also concerned about how inflation would be managed, although most expressed confidence that it would drift back toward the 2% level, and reach… Eventually there in 2027. The Fed cut a full percentage point from its key borrowing rate from September through December.
In fact, other Fed speakers this week offered views at odds with that of Bowman, who is generally viewed 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 on Wednesday in Paris, Governor Christopher Waller had a more optimistic view on inflation, saying that calculated or estimated prices that feed inflation data keep rates high, while observed prices show moderation. He expects “further cuts would be appropriate” to the Federal Reserve's key interest rate, which currently lies in a range of 4.25%-4.5%.
Earlier Thursday, Regional Chairs Susan Collins of Boston and Patrick Harker of Philadelphia expressed confidence that the Fed will be able to cut interest rates this year, if at a slower pace than previously thought. At the December meeting, the Federal Open Market Committee set the equivalent of two quarter-point cuts this year, compared to four cuts expected at the September meeting.
However, as a conservative, Bowman is a frequent FOMC voter and will have a say this year on policy. She is also considered one of the favorites to take over as vice president 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 like tariffs and immigration. Minutes from the December meeting cited officials' concerns about what the initiatives could mean for the economy.
At the same time, Bowman expressed concern about loosening the policy too much. She pointed to strong gains in the stock market and rising Treasury yields as indicators that interest rates are restricting economic activity and suppressing inflation.
“In light of these considerations, I continue to favor a cautious and gradual approach to adjusting the policy,” she said.
