Federal Reserve Governor Michelle Bowman stated on Monday that while monetary policy is “now in a good place,” she wants to see further progress on inflation before considering interest rate cuts.
Inflation Concerns Persist
Speaking at the American Bankers Association, Bowman emphasized the need for stronger evidence that inflation is consistently declining. “I would like to gain greater confidence that progress in lowering inflation will continue as we consider making further adjustments to the target range,” she said.
Rising core goods price inflation since last spring has slowed disinflation, she added. While she expects inflation to continue decreasing this year, she cautioned that it “may take longer than we would hope.”
Market Reactions and Current Policy Stance
The latest consumer price index showed inflation rising 0.5% month-over-month in January, exceeding Dow Jones estimates of 0.3%. The annual inflation rate hit 3%, surpassing consensus forecasts of 2.9%.
The Federal Reserve maintained its target rate at a range of 4.25% to 4.5% in its January policy meeting. Bowman said the current level is appropriate for “allowing the Committee to be patient and pay closer attention to the inflation data as it evolves.” She also noted that the stance provides an opportunity to assess economic activity and administration policies.
Impact of Trump’s Trade Policies
President Donald Trump’s tariffs on major trading partners have raised concerns among economists about rising prices. Expectations for further interest rate cuts in 2025 have weakened due to trade policy uncertainties. According to CME Group data, traders are now pricing in just a single quarter-percentage-point rate reduction this year.
While inflation remains above expectations, Bowman and the Federal Reserve appear cautious about making premature rate cuts. The evolving trade policies and economic indicators will likely shape future monetary policy decisions.
