Fed’s lone dissenter views jumbo cut ‘premature declaration of victory’ on inflation

ISTANBUL

Michelle Bowman, a member of the US Federal Reserve Board of Governors, said Friday she views the central bank’s jumbo interest rate cut as a “premature declaration of victory” on inflation.

Bowman, who was the only member of the Federal Open Market Committee voting for a 25 basis points of rate cut instead of 50 basis points, said core inflation remains above 2.5%.

“We have not yet achieved our inflation goal,” she said in a statement. “I see the risk that the Committee’s larger policy action could be interpreted as a premature declaration of victory on our price stability mandate.”

“I believe that moving at a measured pace toward a more neutral policy stance will ensure further progress in bringing inflation down to our 2 percent target. This approach would also avoid unnecessarily stoking demand,” she added.

Bowman said American economy remains strong, with solid underlying growth in economic activity and a labor market near full employment.

“Although hiring appears to have softened, layoffs remain low,” she said. “I see the normalization in labor market conditions as necessary to help bring wage growth down to a pace consistent with 2 percent inflation given trend productivity growth.”

Bowman said her reading of labor market data has become more uncertain due to increased measurement challenges, and the difficulty in assessing the effects of recent immigration flows.

“I am also taking signal from continued solid growth in the spending data, especially consumer spending, reflecting a healthy labor market,” she added.

“Higher prices have an outsized impact on lower- and moderate-income households. Accomplishing our mission of returning to low and stable inflation at our 2 percent goal is necessary to foster a strong labor market and an economy that works for everyone in the longer term,” she added.

• Fed rate cut
• Inflation
• Michelle Bowman
• US Federal Reserve Board of Governors