Fed Bowman: Expect inflation to decline by upside risks remain

Fed Michelle Bowman is speaking and says:

• Expect inflation to decline but upside risks remain.
• Need greater confidence in falling inflation before cutting rates again.
• Patience on rate cuts will allow more clarity on impact of administration policies.
• Labor market not tighter due to a slowed hiring, but unemployment remains below estimates of full employment.
• Wage growth above level consistent with Fed’s inflation target..
• High asset prices may have slowed progress on inflation.
• Also monitoring supply chains, signs of pent up demand for inflation risk

Back on January 31, Bowman spoke and emphasized that inflation remains elevated with upside risks, and while she still expects it to moderate, the Fed needs data confirmation before proceeding with further rate cuts.

She reiterated that rate cuts are expected this year, but any adjustments should be cautious and gradual, allowing time to assess economic conditions. Bowman believes current policy is well-positioned for the Fed to monitor key data, including the economic impact of the Trump administration’s policies, before making further moves.

She pointed to fragile supply chains, geopolitical tensions, and post-election pent-up demand as potential inflationary pressures. The first quarter data will be crucial in determining how quickly inflation improves.

On labor she said that while the labor market isn’t excessively tight, wage growth remains inconsistent with the 2% inflation target. She also highlighted long-term Treasury yields as a potential indicator of whether tighter policy may be needed. Additionally, Bowman noted that monetary policy may not be exerting enough pressure on the economy, with easy financial conditions and high asset prices potentially slowing inflation progress.

The comments today are consistent with those comments from the end of January.

This article was written by Greg Michalowski at www.forexlive.com.