Fed's Bowman Seeks Greater Confidence on Inflation Before Rate Cuts, Citing Trade Policy Uncertainty
Federal Reserve Governor Michelle Bowman emphasized the need for increased assurance that inflation will decline persistently before considering further interest rate reductions. She expressed concerns over the potential impact of the Trump administration's trade and other policies on economic conditions.
According to remarks prepared for the American Bankers Association conference, Bowman indicated that the Fed's benchmark interest rate is currently within an appropriate range of 4.25% to 4.5%. She emphasized the importance of patience and monitoring inflation data closely.
Bowman believes that maintaining current rates allows time to assess economic indicators and gain clarity regarding the administration's policies and their effects. She highlighted the importance of understanding these policies' implementation and their potential impact on the economy.
President Trump has implemented numerous trade orders and tariffs since the beginning of his second term, but has also rescinded some. Bowman, who was appointed by Trump during his first term, has been vocal in her hawkish stance on inflation.
She anticipates a further slowdown in inflation during the year, as evidenced by expectations of a decline in the personal consumption expenditures price index excluding food and energy from 2.8% in December to 2.6% in January. However, she noted that inflation remains above the Fed's 2% target and that unemployment remains below her estimate of full employment. Furthermore, wages are growing faster than she deems consistent with the Fed's inflation goal.
Despite her expectation of further inflation moderation, Bowman acknowledged potential upside risks to inflation. The Fed is expected to maintain its benchmark interest rate at its upcoming March meeting while closely monitoring the effects of the proposed and implemented tariffs.