‘The Claman Countdown’ panelists Kate Moore and Joseph LaVorgna predict the Federal Reserve’s interest rate moves and the yield curve’s normalization.
Federal Reserve Governor Michelle Bowman said Tuesday that she does not expect to cut interest rates before the end of the year – and remains willing to hike again if progress on inflation stalls.
“We are still not yet at the point where it is appropriate to lower the policy rate,” Bowman said during a prepared speech in London.
Reducing rates too soon could risk reigniting high inflation, she warned, which would require additional rate increases in order to tame price pressures within the economy. In a discussion following her speech, Bowman said she does not project any rate cuts happening this year, and has instead shifted those into future years.
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Bowman – who is a voting member of the 12-person Federal Open Market Committee – also reiterated that she is willing to tighten monetary policy further if there is evidence that progress on inflation is slowing.
Federal Reserve Governor Michelle Bowman delivers remarks at an American Bankers Association conference in San Diego, California, on Feb. 11 2019. (Reuters / Reuters)
“I remain willing to raise the target range for the federal funds rate at a future meeting should progress on inflation stall or even reverse,” she said. “Given the risks and uncertainties regarding my economic outlook, I will remain cautious in my approach to considering future changes in the stance of policy.”
Officials voted at their most recent meeting in May to hold interest rates steady at a range of 5.25% to 5.5%, the highest level since 2001. Although policymakers left the door open to rate cuts later this year in their post-meeting statement, they also stressed the need for “greater confidence” that inflation is coming down before easing policy.
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Since then, there has been some evidence that inflation is starting to ease again, albeit slowly. The May consumer price index showed that inflation had cooled slightly to 3.3%, down from 3.4% the previous month, alleviating investor concerns that prices were heating up again. However, that remains well above the Fed’s 2% target.
Federal Reserve Chair Jerome Powell attends a press conference in Washington, D.C., on May 1, 2024. (Photo by Liu Jie/Xinhua via Getty Images / Getty Images)
“Since the beginning of 2024… we have seen only modest further progress on inflation,” Bowman said. “With average core CPI inflation this year through May running at an annualized rate of 3.8%, notably above average inflation in the second half of last year, I expect inflation to remain elevated for some time.”
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Minutes from the meeting released earlier this month showed that officials are prepared to keep rates elevated for longer after a string of disappointing inflation readings in the first three months of the year, and willing to hike again if needed.
“Participants noted disappointing readings on inflation over the first quarter and indicators pointing to strong economic momentum, and assessed that it would take longer than previously anticipated for them to gain greater confidence that inflation was moving sustainably toward 2 percent,” the minutes said.