Financial联社November 21 news (Editor Xia Junxiong) Local time Wednesday, November 21, Federal Reserve Governor Bowman called for a continued cautious approach to further interest rate cuts, as progress in reducing inflation has already slowed, and the job market is strong.

Bowman spoke at the Pelican Bay Forum Club in Florida on Wednesday, saying, "In the absence of achieving the inflation target, I prefer to cautiously lower the policy rate to better assess our distance from the ultimate goal, while closely monitoring changes in the labor market."

In September, the Federal Reserve initiated the highly anticipated easing cycle with a 50 basis point rate cut, followed by another 25 basis point cut in November, bringing the federal funds target range down to 4.5%-4.75%.

Interestingly, Bowman opposed the 50 basis point rate cut by the Federal Reserve in September. She was the only official at that rate meeting who voted against the 50 basis point cut, and also the first Fed governor since 2005 to vote against a rate decision. However, Bowman supported the decision to cut rates by 25 basis points this month.

Within the Federal Open Market Committee (FOMC), Bowman is the most hawkish official.

The market currently expects the probability of another interest rate cut by the Federal Reserve in December to exceed 50%, but Bowman's speech indicates that if the labor market remains strong and progress in reducing inflation stalls, she may not support further rate cuts.

The next Fed meeting is scheduled for December 17-18, and before this meeting, policymakers will examine the inflation and employment data for November.

"Since the beginning of 2023, we have made significant progress in reducing inflation, but progress seems to have stalled in recent months," Bauman said.

Bauman believes that the neutral interest rate today is much higher than before the outbreak of the COVID-19 pandemic. "Therefore, we may be closer to a neutral policy stance than currently believed," she said.

The neutral interest rate refers to a level of interest rates that neither stimulates nor suppresses the economy.

Bauman added, "Before achieving the goal of price stability, we cannot rule out the risk of policy rates reaching or even falling below the neutral level."

She pointed out that the year-on-year growth rate of the core personal consumption expenditures (PCE) price index has been hovering around 2.7% since May, and preliminary data suggest that progress in October may also be limited.

The core PCE price index is the inflation indicator favored by Federal Reserve officials, and the so-called 2% long-term inflation rate target is based on core PCE data.

Bauman stated that she will focus on new data and meet with a wide range of stakeholders before the December meeting to assess the appropriateness of the current policy stance.

Editor / jayden