FED Member Michelle Bowman stated in her speech at the Florida Bankers Association leaders' dinner on Tuesday that she was in no rush to reduce interest rates in the United States.
Bowman's basic view is that inflation will continue to fall if the policy rate remains constant. He underlined his cautious approach to considering future policy changes.
Last month, the Fed decided to keep its benchmark interest rate in the current range of 5.25%-5.50%. Bowman supported this decision and said in a statement today that he believes the Fed's policy stance is restrictive and appropriately calibrated to ease inflation pressures.
He reiterated his view that if data continues to show inflation is moving sustainably towards the Fed's 2% target, it would be appropriate to eventually lower the policy rate to prevent it from becoming overly restrictive.
But Bowman noted that unexpectedly strong inflation data in January showed slower progress towards the 2% target. Bowman noted that consumer spending and economic activity remain strong and the labor market remains tight. According to Bowman, loosening financial conditions and additional fiscal stimulus could increase demand and delay the improvement in inflation. Geopolitical risks may also contribute to price pressures.
Bowman warned that cutting the policy rate too early could require further policy rate increases in the future to bring inflation back to 2 percent in the long term. He added that he was open to increasing the policy rate if necessary.
*This is not investment advice.