Michelle Bowman, a member of the Federal Reserve Board, said she still sees upward pressure on inflation and a strong labor market. "The progress made in reducing inflation in May and June is encouraging, but the inflation rate is still far above the Committee's 2% target, which is worrisome. When considering adjustments to the current policy stance, I will continue to be cautious."
Michelle Bowman, a member of the Federal Reserve Board, said on Saturday (August 10th) that she still sees upward pressure on inflation and a strong labor market.
Media analysis suggests that this Federal Open Market Committee (FOMC) voter is likely to support a smaller interest rate cut at the September meeting, or even be prepared not to support a central bank easing lending rates.
"The progress made in reducing inflation in May and June is encouraging, but the inflation rate is still far above the Committee's 2% target, and that is worrisome. When considering adjustments to the current policy stance, I will continue to be cautious."
She said that U.S. fiscal policy, immigration's impact on the housing market, and geopolitical risks could all bring upward pressure on prices.
Data released last month by the U.S. Bureau of Economic Analysis showed that the Federal Reserve's most favored inflation indicator, the core personal consumption expenditure (PCE) price index, rose 2.6% year-on-year in June, bringing it closer to the bank's 2% target and shifting the focus of many officials to the labor market.
Federal Reserve Chairman Powell also said at the end of last month's policy meeting that "the question is whether overall data, changing prospects and risk balances are consistent with increased inflation confidence and steady labor markets. If the criteria are met, we may consider rate cuts as early as the September meeting."
Last Friday's non-farm report showed that the US unemployment rate unexpectedly rose to 4.3% in July, the highest since October 2021, triggering the "Sam Rules". Historically, the rule has been validated in all nine US economic recessions since 1960.
Earlier this week, financial markets greatly increased expectations for the size of US interest rate cuts during the year, and some investment banks even thought that an "emergency rate cut" might occur. In response, Bowman said that the 4.3% unemployment rate may have exaggerated the degree of cooling in the labor market.
Currently, Bowman is considered the most "hawkish" member among the policy makers of the Federal Reserve, consisting of 7 directors and 12 regional Federal Reserve Bank presidents.
Before joining the Federal Reserve Board, Bowman was the Kansas State Bank Supervisor and was therefore appointed as a director responsible for regulating community banks.
Among the seven directors, she and Powell and Christopher Waller were nominated by former President Trump, but Powell's second term was nominated by Biden.
Bowman said, "This year's rise in the unemployment rate mainly reflects weaker hiring and longer time for job seekers to find work, but layoffs are still less frequent."
Of course, Bowman also admitted that there are risks to cutting rates too late, saying that if inflation data continues to improve, "gradually lowering the federal funds rate to prevent monetary policy from being too tight would be the appropriate approach."
She also emphasized that officials will receive a series of new data, including employment reports and two inflation reports, before the September meeting.
Editor/Lambor