Federal Reserve Governor Michelle Bowman said on Tuesday that it is not yet the right time to start cutting interest rates, adding that she would be open to raising interest rates if inflation does not ease.
“If incoming data indicate that inflation is moving sustainably toward our 2 percent target, it will eventually become appropriate to gradually lower the federal funds rate to prevent monetary policy from becoming too restrictive,” Bowman said in prepared remarks for a speech in London. excessive”. “However, we are still not at the point where it is appropriate to cut interest rates.”
The comments reflect prevailing sentiment at the central bank, where most policymakers have said in recent weeks that while they still expect inflation to return to the Fed's 2% target, they need more evidence.
Recent readings showed inflation moderating, with the Fed's preferred indicator at just under 3%. However, the Federal Open Market Committee, which sets interest rates, noted after its last meeting that there had been only “modest additional progress.”
Among the most stringent decision-makers, Bowman noted that there are “a number of prevailing upside risks” that could accelerate her outlook.
“I remain willing to raise the target range for the federal funds rate at a future meeting if progress in inflation stalls or even reverses,” she said. “Given the risks and uncertainties of my economic outlook, I will remain cautious in my approach to considering future changes in policy stance.”
On Friday, the Commerce Department will release its reading of the Personal Consumption Expenditures price index for May, the Federal Reserve's preferred measure of inflation. Economists surveyed by Dow Jones expect 12-month inflation to reach 2.6% across all items and core, which excludes food and energy prices.
While that would represent a smaller boost compared to April, Bowman said she still expects the Fed to keep its key overnight borrowing rate in a range of 5.25% to 5.50% “for some time.”
Moreover, it noted that it is not affected by interest rate cuts from the Fed's global counterparts such as the European Central Bank, which recently cut key interest rates by a quarter of a percentage point. “It is possible that in the coming months the course of monetary policy in the United States will deviate from the path of other advanced economies,” Bowman said.
In other Fed news on Tuesday, Governor Lisa Cook expressed optimism that inflation will show greater progress in 2025, allowing the Fed to cut interest rates at some point.
“With inflation progressing significantly and the labor market gradually slowing, it will be appropriate at some point to reduce the level of policy restrictions to maintain a healthy balance in the economy,” Cook told the Economic Club of New York.
While Cook said she is optimistic that inflation will trend down and that supply and demand in the labor market will achieve a better balance, she also noted that risk factors remain. These include higher rates of credit card delinquencies and tightening credit conditions, as well as the difficulty of evaluating economic data that has been subject to continuous and significant revision.
The statements by both officials come on the heels of other decision makers saying on Monday that they were hesitant about the reduction.
San Francisco Federal Reserve Bank President Mary Daly rejected the idea of a pre-emptive cut to hedge against a deterioration in the labor market and a slowdown in the economy.
“I think pre-emptive reduction is something you do when you see risks,” Daly told CNBC's Deirdre Bosa during a public event in San Francisco. He added, “We will be resolute until we finish the job. That is why not taking preventive action when it is not necessary is extremely important.”
Chicago Fed President Austan Goolsbee also told CNBC's Steve Liesman earlier Monday that if he saw “more months” of good inflation data, he would question whether policy needs to be as restrictive as it has been, suggesting It paves the way for cuts.
As conservatives, Cook and Bowman are frequent FOMC voters. Daly also gets a vote this year while Goolsby does not, although he gets a vote at meetings and presents his projections to the committee committee.
A 'point chart' grid for price forecasts as well as a summary of economic forecasts.
