Federal Reserve Governor Michelle Bowman stepped into the spotlight on Monday, commenting on the current state of monetary policy. During her speech at an American Bankers Association conference in San Diego, she expressed that the policy framework “is now in a good place,” though she stressed the importance of seeing more consistent inflation data before easing interest rates further.
Bowman conveyed her desire for “greater confidence that progress in lowering inflation will continue” before considering any further tweaks to the target range for interest rates. The ongoing rise in core goods price inflation since spring has, according to her, hampered progress in this area. She remains optimistic about inflation slowing down over the year but cautioned that the process of disinflation might be more protracted than anticipated.
She also highlighted that “greater risks to price stability” persist, particularly against the backdrop of a robust labor market. The latest consumer price index revealed that inflation for January was higher than expected, increasing by 0.5% from the previous month, surpassing the 0.3% rise forecasted by a Dow Jones survey. This adjustment pushed the annual inflation rate to 3%, topping consensus predictions of 2.9%.
In its January policy meeting, the Federal Reserve decided to hold the target rate steady within a range of 4.25% to 4.5%. Bowman remarked that this current rate level is suitable for enabling the Committee to be “patient and pay closer attention to the inflation data as it evolves.”
She added that the present policy stance gives the Federal Reserve a chance to analyze new indicators of economic activity and gain further insight into the administration’s policies and their impact on the economy.
Meanwhile, economists have raised alarms about potential price hikes due to President Donald Trump’s tariffs on top trading partners. As Trump’s trade war unfolds, expectations for further interest rate cuts in 2025 have waned. Traders, based on CME Group Data, are currently anticipating only one quarter-percentage-point rate-cut this year.
