(Bloomberg) — Federal Reserve Governor Michelle Bowman said she doesn’t expect it will be appropriate for the Fed to cut interest rates in 2024, pointing to persistent inflation in the first several months of the year.
Most Read from Bloomberg
Bowman made the comments in a Bloomberg News interview following a speech to bankers in Texas, where she urged the central bank to proceed “carefully and deliberately” as policymakers move toward the Fed’s 2% inflation goal.
“I, at this point, have not written in any cuts” for 2024, Bowman said in the interview, referring to the economic projections officials submit each quarter. “I’ve sort of had an even expectation of staying where we are for longer. And that continues to be my base case.”
A series of policymakers this week have echoed calls for higher-for-longer rates. Dallas Fed President Lorie Logan, speaking in New Orleans Friday, said “it’s just too early to think about cutting rates,” given disappointing inflation data so far this year.
Earlier this week, Boston Fed President Susan Collins said it will take “more time than previously thought” to bring inflation sustainably down to the central bank’s 2% target, and Minneapolis President Neel Kashkari said that rates will likely stay high “for an extended period of time.”
US central bankers left their benchmark rate unchanged last week at a more than two-decade high, where it’s been since July of last year. Following the decision, Fed Chair Jerome Powell said recent inflation data hasn’t given the committee more confidence that price increases are slowing to 2%. He did not share when he thought the central bank would reduce rates.
Bowman said following three or four months of inflation disappointments, it would take an extended period of time before she would be confident inflation is returning to the 2% target, a precondition for cuts.
“So my expectation would be a number of months of progress,” she said. “And a number of probably meetings as well before I might be comfortable with that.”
Bowman described the US economy as having positive momentum, noting consumer spending has been strong. One caveat to her interest-rate expectation is that an economic shock, if it happened, “would present a case where we would need to address that through monetary policy.”
Proceeding Carefully
“It is of utmost importance that we maintain credibility in pursuing our fight against inflation by proceeding carefully and deliberately to achieve our 2% goal,” Bowman said in a speech Friday primarily focused on financial and banking regulation in Arlington, Texas.
Speaking to the Texas Bankers Association, Bowman also highlighted risks with commercial real estate — notably offices — as the Covid-19 pandemic has led to more remote work.
“Some banks have experienced an increase in CRE loan delinquencies, although delinquency rates generally remain low,” she said. “We could see declines in property values, reduced rental income cash flows, or other conditions that could lead to impairment of some banks’ CRE loans or portfolios, especially if those loans mature and are refinanced at higher interest rates.”
Bowman also noted signs of low liquidity in the Treasury market. She added, “Ultimately, liquidity in the US Treasury market has the potential to amplify or dampen shocks to the financial system.”
(Adds comments from interview starting in first paragraph.)
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.