- “I am not confident that inflation will come down in the same way it did in the second half of last year.”
- Inflation remains ‘uncomfortably above’ 2% target
- Labor market shows signs of slowing, but uncertainty remains
- Inflationary risks remain, including housing and geopolitical factors.
- Calls for patience in making monetary policy decisions
- Criticism of rapid regulatory changes in the banking sector
- Calls for a thoughtful framework for mergers and acquisitions in the banking sector
Federal Reserve Governor Michelle Bowman delivered a wide-ranging speech on monetary policy, banking regulation, and liquidity concerns. At the Moon Ball, Bowman stressed caution about potential interest rate cuts, noting that inflation risks remain upside despite recent progress. She noted that core personal consumption expenditures inflation averaged 3.4% annually in the first half of 2024, well above the Fed’s 2% target.
Bowman highlighted several factors that could keep inflation high, including normalization of supply chains, geopolitical risks, and potential fiscal stimulus. She also raised concerns that immigration could lead to higher housing costs in some areas.
On the labor market, Bowman acknowledged signs of a slowdown but pointed to measurement and data review challenges that complicate assessment. She called for a patient approach to policy decisions, saying the Fed needs to avoid overreacting to individual data points.
This is certainly a downward revision from the 49% chance of a 50 basis point rate hike at the September meeting.
quote:
“If incoming data continue to show that inflation is moving sustainably toward our 2 percent goal, it will be appropriate to gradually lower the federal funds rate to prevent monetary policy from becoming overly restrictive on economic activity and employment. But we need to be patient and avoid undermining the continued progress in reducing inflation by overreacting to any single data point.”