Fed Governor Bowman adjusts rate stance, says hikes likely over but not ready to cut

Federal Reserve Governor Michelle Bowman, who had been one of the central bank’s staunchest advocates for tight monetary policy, said Monday she’s adjusted her stance somewhat and indicated that interest rate hikes are likely over.

However, she said she’s not ready to start cutting yet.

In remarks delivered at a private event in South Carolina, Bowman noted the progress made against inflation and said it should continue with short-term rates at their current levels.

“Based on this progress, my view has evolved to consider the possibility that the rate of inflation could decline further with the policy rate held at the current level for some time,” she said. “Should inflation continue to fall closer to our 2 percent goal over time, it will eventually become appropriate to begin the process of lowering our policy rate to prevent policy from becoming overly restrictive.”

“In my view, we are not yet at that point. And important upside inflation risks remain,” she added.

As a governor, Bowman is a permanent voter of the rate-setting Federal Open Market Committee. Prior to this speech, she had repeatedly said additional rate hikes likely would be needed to address inflation.

Her comments come a few weeks after the committee, at its December meeting, voted to hold the benchmark federal funds rate at its current target range of 5.25%-5.5%. In addition, committee members, through their closely followed dot-plot matrix, indicated that the equivalent of three quarter-percentage point rate cuts could come in 2024.

However, minutes released last week from the Dec. 12-13 meeting provided no potential timetable on the reductions, with members indicating a high degree of uncertainty over how conditions might evolve. Inflation is trending down toward the Fed’s target, and by one…