Michelle Bowman Fed Board Member
"US Monetary Policy Will Differ from Other Advanced Economies"
Michelle Bowman, a member of the U.S. Federal Reserve Board (Fed), dismissed the possibility of a rate cut within this year and stated that there is room to raise rates if inflationary pressures increase. While the European Central Bank (ECB) cut rates this month, she also emphasized that the Fed's monetary policy path could differ.
Bowman said in pre-distributed remarks ahead of her speech in London, UK, on the 25th (local time), "We have not yet reached the appropriate time to lower the policy rate."
She explained, "If data show that inflation is consistently moving toward the 2% target, it would be appropriate to gradually lower the federal funds rate to prevent monetary policy from becoming excessively restrictive," but added, "I do not expect a rate cut this year and have pushed the timing of a cut into the future."
Regarding inflation outlook, she diagnosed that there are "many upside risks" and even mentioned the possibility of further rate hikes.
She said, "If inflation progress stalls or reverses, I am willing to raise the target range for the federal funds rate at upcoming meetings," and added, "We will maintain a cautious approach that considers risks and uncertainties to the economic outlook when contemplating changes in policy stance."
Bowman said that the May Personal Consumption Expenditures (PCE) price index, to be released on the 27th, is expected to be lower than the April figure, but the Fed will maintain the benchmark interest rate at 5.25?5.5% for the time being. The core PCE price index, the Fed's most important inflation gauge, is expected to have risen 0.1% month-over-month and 2.6% year-over-year in May. Both figures are below the previous month's (0.2% and 2.8%, respectively).
She also emphasized that the direction of U.S. monetary policy will not be swayed by the moves of major countries such as the ECB. Earlier, the ECB cut its benchmark interest rate by 0.25 percentage points to 3.75% on the 6th.
Bowman said, "In the coming months, the path of U.S. monetary policy is likely to differ from that of other advanced economies."
Bowman’s views on monetary policy do not significantly deviate from the Fed’s cautious stance on rate cuts.
Mary Daly, president of the Federal Reserve Bank of San Francisco, also dismissed the possibility of a preemptive rate cut on the same day. She told CNBC, "Preemptive cuts happen when there is risk. We will remain resolute until the job is done. It is very important not to take preemptive action when it is not necessary."
However, there were also remarks suggesting that the possibility of rate cuts could arise depending on whether incoming inflation data slows down in the future.
Charles Evans, president of the Federal Reserve Bank of Chicago, said on CNBC the previous day, "If we see good inflation data for several months, questions will arise about the need to maintain restrictive policy," and added, "The groundwork for cuts will be laid."
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