Fed Governor Bowman says December rate cut should be last | Wilnesh News

Federal Reserve Governor Michelle Bowman said Thursday that she supported the latest rate cut but did not believe further cuts were necessary.

In a speech to bankers in California that was part monetary policy and part regulation, Bowman said she was concerned that inflation was “discomfortably above” the Fed’s 2% target, which led her to believe that December’s A quarter-percentage point rate cut should be the last one of the current cycle.

“I support the December policy action because, in my view, it represents the final step in the (Federal Open Market Committee’s) policy recalibration phase,” the central banker said in prepared remarks. Bowman added , current policy rates are close to what she considers “neutral,” neither supporting nor constraining economic growth.

Bowman added that despite the progress that had been made, “there are still upside risks to inflation.” The Fed’s preferred inflation gauge showed inflation at 2.4% in November, but inflation excluding food and energy was 2.8%, a core measure that officials view as a better long-term indicator.

Bowman added: “Inflation fell sharply in 2023, but that progress appeared to have stalled last year, with core inflation remaining disturbingly above the Committee’s 2% target.”

The comments came just a day after the Federal Open Market Committee (FOMC) released minutes of its December 17-18 meeting, which showed that other members also expressed concerns about the operation of inflation, although most members expressed confidence Inflation will return to 2%, eventually reaching this target in 2027.

In fact, other Fed speakers this week offered opposing views to Bowman, who is generally considered one of the more hawkish members of the committee, meaning she prefers a more aggressive approach to curbing communications. expansion, including higher interest rates.

Governor speaks in Paris on Wednesday Christopher Waller takes a more optimistic view On inflation, he said imputed or estimated prices that incorporate inflation data have kept interest rates high, while observed prices show a slowdown. He expects “further cuts” in the Fed’s key policy rate, which currently ranges from 4.25% to 4.5%.

Earlier Thursday, Boston District President Susan Collins and Philadelphia District President Patrick Harker both expressed confidence that the Fed will be able to cut interest rates this year, but at a slower pace than previously expected. The Federal Open Market Committee (FOMC) expected two quarters of interest rate cuts this year at its December meeting, and a four percentage point rate cut at its September meeting.

Still, as governor, Bowman is a permanent constituent of the FOMC and will have a say in policy this year. She is also considered one of the most likely candidates to be appointed vice chairman of banking regulations when President-elect Donald Trump takes office later this month.

Speaking of the incoming administration, Bowman advised her colleagues not to “prejudge” Trump’s possible actions on issues such as tariffs and immigration. Minutes from the December meeting showed officials expressed concern about what the moves might mean for the economy.

At the same time, Bowman expressed concern that the policy was too loose. She pointed to strong gains in stocks and rising Treasury yields as evidence that interest rates are curbing economic activity and curbing inflation.

“Given these factors, I still prefer a cautious and gradual approach to policy adjustments,” she said.