US Fed official expresses concern over decision to implement substantial interest rate cut
Date
9/22/2024 9:37:25 AM
(MENAFN) Michelle Bowman, a member of the US Federal Reserve Board of Governors, expressed her concerns on Friday regarding the central bank's recent decision to implement a substantial interest rate cut, labeling it a "premature declaration of victory" in the fight against inflation. Bowman was the sole member of the Federal Open Market Committee who voted for a more modest cut of 25 basis points instead of the 50 basis points adopted by the committee. She highlighted that core inflation remains stubbornly above 2.5 percent, indicating that the Fed has not yet met its inflation targets.
In her statement, Bowman emphasized the importance of a cautious approach, arguing that larger policy actions might be misinterpreted as a signal that the inflation issue has been resolved. She advocated for a gradual transition towards a neutral policy stance to continue progress in reducing inflation to the Fed's 2 percent target without unnecessarily inflating demand. Her perspective reflects a broader concern about ensuring that policy measures do not disrupt economic stability.
Bowman noted that the US economy remains robust, with strong underlying growth and a labor market that is close to full employment. While she acknowledged signs of a softening labor market, she pointed out that layoffs are still low. She views the normalization of labor market conditions as essential to moderating wage growth, which is critical for achieving the desired inflation rate in line with productivity trends.
Additionally, Bowman remarked on the complexities of interpreting labor market data due to increased measurement challenges and the impact of recent immigration trends. However, she remains optimistic about consumer spending, which reflects a healthy labor market. She reiterated the importance of returning to low and stable inflation at the 2 percent goal, particularly for supporting lower- and moderate-income households and fostering a sustainable economy that benefits everyone in the long term.
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