(Bloomberg) — Cutting interest rates by a half percentage point this week could mean the U.S. central bank declares victory over inflation too soon, Federal Reserve Governor Michelle Bowman said.
“A larger policy action by the Committee could have been interpreted as a premature declaration of victory on our path to price stability,” Bowman said in a statement released Friday. “I am confident that moving toward a more neutral stance of policy at a steady pace will ensure further reductions in inflation toward our 2 percent objective.”
Bowman, the first Fed governor to dissent from a rate move since 2005, voted against her colleagues’ decision on Wednesday to cut rates by 50 basis points. She said at the time that she would have preferred a quarter-point cut. The Federal Open Market Committee voted 11-1.
Earlier on Friday, Federal Reserve Governor Christopher Waller cited favorable inflation data in recent weeks as a reason for his support for a deeper rate cut. He told CNBC that he now estimates the Fed’s preferred inflation measure, the personal consumption expenditures price index, has increased at an annualized rate of less than 1.8% over the past three months, below the Fed’s 2% target.
“What worries me more is that inflation is lower than I thought it would be,” he said.
In contrast, Bowman said she remains concerned that strong demand could continue to push prices higher.
“I also note continued solid growth in spending data, particularly for consumers, reflecting a healthy labor market,” she said. “Inflation remains above our 2 percent objective, as core personal consumption expenditures prices remain above the 2.5 percent pace they were 12 months ago.”
(Updates with Waller’s comments in fourth paragraph.)
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