The Federal Reserve, despite reports to the contrary, may not be anxious to lower interest rates any time soon.
Michelle Bowman, a member of the Federal Reserve Board of Governors, remarked over the weekend that while “progress in lowering inflation in May and June is a welcome development,” inflation remains “still uncomfortably above” the Federal Open Market Committee’s 2% goal.
“Should the incoming data continue to show that inflation is moving sustainably towards our 2% goal, it will become appropriate to gradually lower the federal funds rate to prevent monetary policy from becoming overly restrictive on economic activity and employment,” Bowman remarked during a meeting of the Kansas Bankers Association.
Added Bowman: “But we need to be patient and avoid undermining continued progress on lowering inflation by overreacting to any single data point.”
Bowman, a former senior staffer with the Federal Emergency Management Agency who has been a member of the Reserve Board since 2018, noted that the “labor market continues to loosen as the number of available workers has increased and the number of available jobs has declined.”
Such trends, she continued, are signs that the “labor market is coming into better balance.”
Bowman noted that even though the nation’s unemployment rate is higher at 4.3% than where it was a year ago, “this is still a historically low unemployment rate.”
“In addition,” Bowman continued, “the ratio of job vacancies to unemployed workers has declined to its pre-pandemic level.”
Bowman also mentioned the effect that increased immigration, global supply chain disruptions, and increased federal spending might have on future monetary policy.
By the time of the next Federal Board of Governors meeting in September, predicted Bowman, “we will have seen a range of additional economic data and information, including one employment and two inflation reports.”
Such data, Bowman added, will provide the Governors with a “wider view of how developments in broader financial conditions might influence the economic outlook.”
By Garry Boulard
