Author: Michael S. Derby
(Reuters) – Federal Reserve Governor Michelle Bowman reiterated on Thursday that she was not yet ready to support the central bank cutting interest rates while inflationary pressures remain high.
In a speech prepared ahead of the 2024 annual meeting of the Idaho, Nevada, Oregon and Washington Bankers Association, Bowman said the Fed’s current stance on interest rates remains “restrictive,” even if monetary policy remains at current levels. Price pressures should also cool.
“If incoming data show that inflation continues to move toward our 2% goal, it will ultimately be appropriate to gradually lower the federal funds rate to prevent monetary policy from becoming overly restrictive,” Bowman said. , I still see some upside risks to inflation.
Bowman added, “If incoming data indicate that inflation progress has stalled or reversed, I would remain willing to raise the target range for the federal funds rate at future meetings.”
The Fed governor’s comments were largely consistent with her recent comments on the economic and policy outlook. Her comments come as Fed officials are looking for evidence that inflationary pressures are steadily falling back toward their 2% target. Officials now plan to cut interest rates by a quarter of a percentage point this year, which many market participants believe will happen at the Federal Open Market Committee meeting in September.
Bowman said in a speech earlier this week that she did not see a rate cut this year, with the possibility of easing policy next year.
In a speech on Thursday, Bowman said overall economic activity has been strong this year but has slowed as inflation progress stalled. She noted that easing financial conditions are creating challenges for the future direction of prices.
“There is also the risk that the easing of financial conditions since late last year has reflected a sharp increase in equity valuations, while additional fiscal stimulus could increase demand dynamics, hinder any further progress, or even cause inflation to re-accelerate,” she said. .
Bowman also said in his speech that the decline in the number of banks in the United States is a problem. At the same time, not enough new banks were created.
“In the longer term, the lack of de novo bank establishment will create a void in the banking system that could lead to a decline in the supply of reliable and fairly priced credit, a lack of financial services in underserved markets, and a continued shift of banking activities out of the banking system. Outside,” she said.
