Source: Wind.
Michelle Bowman, a member of the Federal Reserve Board, said on Tuesday that it is not yet the right time to start lowering interest rates, and added that she would be open-minded about raising interest rates if inflation does not fall.
"If the upcoming data shows that inflation is continuing to move towards the 2% target, then gradually lowering the federal funds rate to prevent monetary policy from becoming too tight will ultimately be appropriate," Bowman said in a London speech. "However, we have not yet reached the point where it is appropriate to lower policy rates."
These comments reflect a widespread sentiment within the Federal Reserve. In recent weeks, most policymakers have stated that while they still expect inflation to return to the Fed's 2% target level, they need more evidence.
Recent data show that inflation has slowed somewhat, and the Fed's preferred inflation measure is slightly below 3%. However, the Federal Open Market Committee (FOMC), which sets interest rates, noted after its last meeting that it had only made "modest further progress."
Bowman pointed out that there are "many upside risks" at present, which could accelerate her outlook. Her views are the most hawkish among all policymakers.
"If inflation stalls or even reverses, I would still be willing to raise the federal funds rate target range at future meetings," she said. "Given the risks and uncertainties in my economic outlook, I will remain cautious when considering future changes to the policy stance."
The US Department of Commerce will release the May personal consumption expenditure price index, which is a favored inflation measure of the Fed, on Friday. Economists expect both the 12-month all-items and core items inflation rates, which exclude food and energy prices, to be 2.6%.
Although this is a slight decline from April, Bowman said she still expects the Fed to maintain its key overnight borrowing rate within the range of 5.25% to 5.5% "for some time".
In addition, Bowman said she will not be influenced by global peers such as the European Central Bank (ECB) that cut rates. The ECB recently lowered its benchmark rate by 0.25 percentage point. "Over the coming months, the US monetary policy path may differ from that of other advanced economies," Bowman said.
As Bowman made the above comments, other officials on Monday said they were hesitant about their rate cut plans. Mary Daly, president of the Federal Reserve Bank of San Francisco, dismissed the idea of preemptive rate cuts to hedge against deteriorating job markets and economic slowdown risks.
Daly said at a public event in San Francisco: "I do think that when you see risks, you'll take preemptive actions."We will stay on course until we finish the job. That's why it's so important not to take preemptive action when it's not necessary."
In addition, Austan Goolsbee, president of the Federal Reserve Bank of Chicago, said earlier that if he sees "more months" of good inflation data, he will question whether policies need to be as strict as they are now to pave the way for rate cuts.
Editor/Lambor