Caixin September 24 news, Michelle Bowman, a member of the Federal Reserve Board, recently stated that the central bank should lower interest rates at a "restrained" pace. She believes that inflation risks still exist in the United States, and the labor market has not shown significant weakness.

On Tuesday local time (September 24), Bowman said at the Kentucky Bankers Association Annual Conference, 'In order to achieve our dual mandate, especially as the labor market continues to approach estimates of full employment, I see greater risks on the price stability front.'

In the decision to cut interest rates by 50 basis points last week, Bowman cast the only dissenting vote, hoping for a 25 basis point rate cut. It is worth mentioning that Bowman is the first Fed governor in nearly 19 years to vote against an interest rate decision, the last time this happened was in September 2005.

Two days later, Bowman posted a statement on the Fed's official website explaining, 'The Federal Open Market Committee (FOMC) taking larger policy actions might be interpreted as prematurely declaring victory in stabilizing prices.'

In Tuesday's speech, Bowman added that as the central bank begins to lower interest rates, she leans towards a more 'cautious' approach, 'I believe that starting with a 25 basis point rate cut, we can better enhance the strong momentum of the economic situation, while also recognizing the progress we have made in achieving our goals.'

Bauman said that she appreciates Powell addressing her concerns directly at the press conference, namely that this major adjustment measure may unintentionally signal concerns about the economic situation, thereby leading market participants to expect a faster pace of future interest rate hikes as well.

At the time, Federal Reserve Chairman Powell mentioned in the post-meeting press conference that the decision to take 50 basis points, a significant rate cut, aims to maintain a strong labor market. Powell referred to this action as a "recalibration" to ensure that monetary policy does not lag behind the situation.

Regarding the labor market, Bauman stated that she is 'less concerned' about recent labor market data signals unless there are clear trends indicating weak consumer spending and a noticeably soft labor market. She believes that wage growth indicates that the labor market remains tight, and the recent rise in the unemployment rate is 'likely' related to temporary factors.

However, Bauman also added that if data shows substantial weakness in the job market, she would 'support taking action to adjust monetary policy as needed, considering our inflation mandate.' She emphasized that core inflation rates remain above the Fed's 2% target, which is concerning.

The interest rate forecast 'dot plot' released by the FOMC last week shows that 19 policy makers expect the median Fed rate forecast for the end of 2024 to fall between 4.25% and 4.5%. This means that overall, they believe there will be an additional 50 basis points of rate cuts by the end of the year on top of current levels.

However, it should be noted that out of the 19 individuals, 7 expect the Fed to only cut rates by another 25 basis points this year, with 2 others opposing any further adjustments. Bauman stated that her estimate of the 'neutral policy rate' is significantly higher than pre-COVID-19 levels.

"With a higher estimate of the neutral rate, we will reach our destination faster."

Editor/Lambor