Federal Reserve (Fed) Governor Michelle Bowman speaks about the economic outlook and monetary policy at the Kentucky Bankers Association Annual Convention in Virginia. Her comments come after the Fed announced last week the first 50 basis point (bps) rate cut in four years and suggested more rate cuts before the end of the year.
“In the current economic environment, with no clear signs of material weakening or fragility, in my view, beginning the rate cutting cycle with a 1/4 percentage point move would have better reinforced the strength of economic conditions while confidently acknowledging progress toward our goals,” Bowman said.
Highlighted statements
Although the labor market has shown signs of cooling, growth in wages, spending and GDP are not consistent with a material economic weakening.
Upside risks to inflation remain prominent, including supply chain fragility, fiscal policy, and housing supply-demand mismatch.
Recalibrating policy is appropriate given progress on inflation, but victory should not be declared yet.
Core inflation remains uncomfortably above the 2% target, with upside risks given continued growth in spending and wages.
The rise in unemployment is largely due to slowing hiring and improving supply.
Opposition to the half-point cut is justified by inflation still above target, and a measured pace of cuts is more appropriate.
The neutral rate estimate is much higher than before the pandemic, the policy is not as restrictive as it may seem.
Market reaction
Following a series of dovish comments, Bowman’s remarks sounded hawkish, but had no impact on financial markets. The Dollar Index remained unchanged at around 100.70 after his remarks.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
