A hawkish Fed reiterates: it is not yet to the point of cutting interest rates! Still willing to restart rate hikes

Golden Ten New Media

2024-06-28 12:02

Bowman reiterated that he is still not prepared to support a rate cut while inflationary pressures remain elevated.

Fed Governor Bowman reiterated on Thursday that she is not prepared to support a rate cut amid persistently high inflationary pressures.

Bowman said at a conference that the Fed's current interest rate stance remains "restrictive" and that inflation should cool even if monetary policy remains at current levels.

"If the data shows that inflation is moving sustainably toward our 2% target, eventually the Fed will gradually lower the federal funds rate to prevent monetary policy from becoming too restrictive," Bowman said. Bowman added, "We're not at the point where we cut the policy rate appropriately, and I continue to see some upside risks to inflation." ”

Bowman added, "I am still willing to raise rates at future meetings if the new data suggests that inflation progress is stalling or reversing." ”

The Fed governor's remarks are largely in line with her recent comments on the economic and policy outlook. Her comments came as Fed officials were looking for evidence that inflationary pressures were steadily falling back to their 2% target. At the June policy meeting, Fed officials are now expecting a 25 basis point rate cut this year, with many market participants believing the Fed will cut rates at the September FOMC meeting.

In her speech earlier this week, Bowman said she did not see a rate cut this year and could cut rates next year.

In his speech on Thursday, Bowman said overall activity has been strong this year, but has slowed amid stalled progress in inflation. She noted that easing financial conditions are challenging the direction of inflation going forward.

"There is also a risk that the easing of financial conditions, which reflect a sharp rise in equity valuations since late last year, and additional fiscal stimulus, could increase the momentum of demand, hinder any further disinflationary process, or even cause inflation to accelerate again," she said. ”

Bowman also said in her remarks that the decline in the number of U.S. banks is a problem. At the same time, not enough new banks were formed.

"In the long run, the absence of new bank formation will create a void in the banking system that could lead to a decline in the supply of reliable and fairly priced credit, a lack of financial services in underserved markets, and a continued shift in banking activity outside the banking system," she said. ”

View original image 1015K

• 

•