US Fed's Last Hawk Signals "Rate Hikes End"... Cautious on Early Cuts

"Inflation Can Fall Even If Interest Rates Are Maintained"

Michelle Bowman, a prominent hawkish (favoring monetary tightening) member of the U.S. Federal Reserve (Fed), has stepped back from her previous stance that additional interest rate hikes are necessary. She made remarks acknowledging the need for rate cuts.

According to the Fed on the 8th (local time), Bowman stated at a conference hosted by the American Bankers Association in Columbia, South Carolina, "We have decided to consider the possibility that inflation may decline even if the policy rate is maintained at the current level for some time."

United States Federal Reserve System
[Image source=Reuters Yonhap News]

Regarding rate cuts, she said, "If inflation consistently slows to the target level of 2%, it would be appropriate to begin lowering the policy rate to prevent monetary policy from becoming excessively restrictive."

Bowman had maintained the most hawkish stance within the Fed until recently. Even when Christopher Waller, another Fed official who advocated monetary tightening, shifted from a hawkish to a dovish (favoring monetary easing) position in November last year, Bowman held on to her original view.

However, Bowman drew a line regarding market expectations for early rate cuts. She said, "We have not yet reached that point (the start of policy rate cuts)," adding, "It is also important to note that the risk of inflation rebounding remains."

Meanwhile, according to Bloomberg on the same day, Raphael Bostic, President of the Federal Reserve Bank of Atlanta, stated at a discussion hosted by the Atlanta Rotary Club that he expects two rate cuts this year, with the first cut likely in the third quarter. He also mentioned that the U.S. is currently on a path toward the inflation target of 2%, but it is still too early to declare victory.