Once again, Fed Governor Bowman is "hawkish", warning that there is an upward risk of inflation and reaffirming that it is not yet time to cut interest rates and that rates should be kept high for a period of time.

On Tuesday, permanent voting committee member and Fed Governor Bowman stated in a speech on monetary policy that no rate cut action is expected in 2024 and that the expected rate cut time has been changed to 2025:

We have not yet reached the point where it is appropriate to lower the policy rate. Given the risks and uncertainties in my economic outlook, I will remain cautious in considering future changes in policy stance.

It is worth noting that Bowman is one of the most hawkish speakers at the Fed and this time is no exception.

The latest DOT plot from the Fed in June predicts that although no Fed decision-makers expect a rate hike, the average expectation of decision-makers is that there will only be one rate cut before the end of the year.

There are multiple upward risks to the inflation outlook.

Bowman mentioned that so far this year, inflation has only "slightly improved". Improvements in the supply chain and labor supply brought about by immigration are unlikely to continue:

1. The economy is unlikely to benefit further from improvements on the supply side, and the supply chain disruptions during the epidemic have been largely resolved, while the increase in labor participation rate in recent months has been limited.

2. The more open immigration policy and fiscal support since the epidemic may be why the US has diverged from other major economies in recent months. Immigration previously increased labor supply and improved labor market balance, but future immigration policy may tighten. In addition, the limited inventory of housing available at discounted prices in some areas may push up rents caused by the inflow of immigrants.

In addition, due to the limited inventory of housing available at discounted prices, the inflow of immigrants in some areas may push up rents.

Overall, Bowman believes that multiple areas may put upward pressure on prices, and he expects inflation to remain high for some time.

Labor market tightness is driving high wage growth, and geopolitical trends, fiscal stimulus, and relaxed financial conditions are additional potential risks facing the inflation outlook.

Therefore, Bowman believes that too early or too fast a cut in policy rates could lead to a rebound in inflation and the need to further raise policy rates in the future to bring inflation back to 2% over the longer term.

Editor/Somer