Last Friday local time, Federal Reserve Governor Bowman, known as the "Eagle King", said she still sees upside risks to inflation and continued strength in the labor market, suggesting she may not be ready to support a rate cut at the next meeting in September.
“The progress made in reducing inflation in May and June is welcome, but inflation remains significantly above the Committee’s 2 percent objective, which is troubling,” Bowman said in a speech to the Kansas Bankers Association in Colorado Springs.
She added, "I would be cautious in considering adjusting the current policy stance." According to her, U.S. fiscal policy, pressure on the housing market from immigration, and geopolitical risks could all exert upward pressure on inflation.
The Fed’s preferred inflation measure, the personal consumption expenditures price index, has slowed to 2.5% year-on-year in the year ended June. With inflation close to its target, many officials have turned more attention to the labor market, which has shown signs of deteriorating under pressure from high interest rates.
On July 31, Fed Chairman Powell said at a press conference after the interest rate decision that a rate cut would be an option when policymakers gather on September 17 and 18. With the unexpectedly weak employment data in July, economists and investors' expectations for a rate cut have been consolidated.
However, Bowman, a former bank regulator in Kansas, said the recent jump in the unemployment rate to 4.3% likely overstated the extent of the cooling in the labor market.
"The increase in the unemployment rate this year largely reflects weak hiring, as job seekers entering the labor market take longer to find jobs while layoffs remain low," she said.
Bowman acknowledged the risks of waiting too long to cut rates. She said if inflation data continue to improve it would be appropriate to "gradually reduce the federal funds rate to prevent monetary policy from being too tight."
She also highlighted that officials will receive a slew of new data before their September meeting, including a jobs report and two inflation reports.
The article is forwarded from: Jinshi Data
