Federal Reserve Governor Michelle Bowman, one of the most hawkish policymakers of the central bank of the United States, on Wednesday, November 20, called for a more cautious approach in the context of actions on cutting interest rates, noting that the dynamic of inflation still contains reasons for concern, and the labor market is strong.
It is worth mentioning that in the current month, the Fed lowered its policy rate by a quarter of a percentage point to a range of 4.5%-4.75%. Michelle Bowman stated that she supports this decision. According to this policymaker, the mentioned move aligns with her preference for gradually lowering the cost of short-term borrowings. At the same time, she was the only policymaker who disagreed with the September decision of the central bank of the United States to cut interest rates by half a percent.
In a speech at the Forum Club of the Palm Beaches in West Palm Beach, Florida, Michelle Bowman said that in the context of further easing of the Fed’s monetary policy, a cautious approach should be taken against the background of the fact that inflation is still elevated, and progress in approaching the corresponding indicator to the target mark of the US financial regulator at 2%, it seems to have stalled. Also, according to her, as part of deciding on lowering the cost of borrowing, the central bank of the United States should assess how far it is from the endpoint. Separately, she noted that the US financial regulator should recognize that it has not yet managed to achieve the inflation target and continue closely watching the dynamic of the labor market situation.
Michelle Bowman believes that the neutral policy rate is much higher than before the coronavirus pandemic. The mentioned indicator implies a level of borrowing costs that neither bolsters nor breaks economic growth. According to her, the Fed may be closer to the neutral policy rate than one might assume.
Michelle Bowman also stated that the risk that the policy rate may attain or even fall below its neutral level before the price stability goal is achieved should not be excluded. She would watch incoming data and meet with a broad range of contacts before the Fed’s December meeting to assess the appropriateness of the current policy stance.
Michelle Bowman signaled that, in her opinion, the central bank of the United States has no constraint on the next interest rate cut. She also positively assessed the statement following the November Fed meeting. This statement included a flexible, data-dependent approach that provides the US financial regulator with a choice when deciding on future monetary policy adjustments.
Asked about the impact of migration policy changes, which will be realistic after Donald Trump’s future return to the White House next January, on inflation and low-wage labor, Michelle Bowman urged a patient and cautious approach.
Noting that her family’s bank in Kansas mainly serves ranchers and farmers, Bowman said it is very difficult to find people to work in agricultural jobs. She noted that policies are needed that will improve the mentioned situation.
