Fed’s Bowman: not yet at the point where it is appropriate to cut rates

• We have not yet reached the point where it is appropriate to lower interest rates.
• If the data shows that inflation is moving sustainably to 2%, a gradual rate cut will eventually become appropriate.
• Baseline expectations remain that inflation will return to 2% with interest rates remaining steady for some time.
• Willing to raise the target rate at a future meeting if inflation advances stall or reverse.
• He will remain cautious in dealing with future changes in policy stance.
• Other central banks may ease monetary policy sooner or more quickly than the Fed.
• This year we have seen only modest additional progress on US inflation.
• We expect US inflation to remain high for some time.
• You still see a number of upside inflation risks.
• The US labor market remains tight despite some additional rebalancing.

Bowman is a well-known hawk, so these comments are not surprising. The market expects a total of 48.8 basis points of monetary easing by the end of the year (two core cuts) with a 90% chance of no change at the next meeting at the end of July.

Much will depend on the upcoming inflation data. I think the Fed will be more dovish if we get a good inflation report in July. Then, if we get more good numbers in August, Fed Chair Powell will likely pre-commit to a September rate cut at the Jackson Hole symposium.