Fed governor Bowman “eagle”: will be cautious about further rate cuts

Fed Governor Bowman said the Fed should be “moderate” pace of interest rate cuts, she believes that inflation risks remain, and the labor market has not yet shown significant signs of weakness. Bowman said it will continue to take a cautious approach to further rate cuts.

Bowman told the Kentucky Bankers Association on Tuesday, “When it comes to the risks to achieving our dual mission, I continue to see greater risks to price stability, especially as the labor market continues to approach full employment estimates.”

The comments underscore the difference between Bowman and other Fed officials who have recently described the risks to achieving the Fed's two goals - full employment and stable inflation - as roughly balanced or tilted toward employment.

Bowman's opposition to the Fed's decision to cut interest rates by 50 basis points last week - she prefers smaller cuts - makes her the first Fed governor to dissent since 2005.

She said on Tuesday that her preference for a more “modest” approach as a reflection of the Fed's beginning of a rate-cutting cycle was based on several considerations.

She said, “In my view, starting the rate-cutting cycle with a 25-basis-point cut would better reinforce the strength of economic conditions while also confidently recognizing our progress toward our goals.”

Fed Chairman Jerome Powell emphasized that the larger rate cuts are designed to keep the labor market strong, calling it an adjustment to ensure the Fed doesn't fall behind.