Fed Governor Bowman: Progress Towards Inflation Goal Looks Stalled

Fed Governor Bowman on Wednesday expressed unease about lowering interest rates while inflation remains above the 2% target, adding more colour to her call for further cautious rate cuts.’ We are recalibrating policy, but we have not yet achieved our inflation target, and that worries me,’ she said. With inflation still high and the Fed's progress toward its 2% target looking stalled, Bowman said, ‘I would be inclined to cautiously lower the policy rate to better assess how far we are from the finish line while recognising that we have not yet achieved our inflation target and keeping a close eye on the evolution of the labour market.’ She argued that the neutral policy rate is much higher than it was before the new crown pandemic, and that the Fed is not constrained in cutting rates again as the market currently expects. She also said that the bigger risk to the Fed is the price stability objective, although a deterioration in labour conditions is also possible.