US inflation remains “slightly” above the US Federal Reserve’s (The Fed) target, despite progress in recent months, a Fed official said on Saturday (10/8).
The US central bank kept interest rates at their highest level in two decades as it seeks to return inflation to its long-term target of 2% following a surge in prices caused by the COVID-19 pandemic.
The Fed’s inflation gauge is currently at an annual rate of 2.5%, well below its peak reached in 2022. Meanwhile, the U.S. economy is still growing and the labor market is weakening slightly.
To that end, Fed Chairman Jerome Powell suggested in late July that his institution could deliver its first interest rate cut as early as September, if economic data continues to show results in line with their expectations.
However, a number of Fed officials have been more cautious in signaling a rate cut.
“Progress in bringing inflation down in May and June is a positive development,” Fed Chair Michelle Bowman said at a conference in Colorado Springs. “However, inflation remains above the committee’s 2% target.”
Despite “upside risks,” Bowman said he still expects inflation to ease in the coming months. But he cautioned policymakers to be patient “and not undo the progress that has been made in bringing inflation down by overreacting to a single data point.”
“I will remain cautious in determining my stance in considering changes related to the current policy position,” he added.
Comments by Bowman, a permanent member of the Fed's interest rate-setting committee, suggested he remains concerned about cutting interest rates too quickly, even as many in financial markets support a September rate cut.
Futures traders are now widely convinced that the Fed will cut rates at its next meeting in September. They are divided on how big the first cut will be, according to data from CME Group.
Meanwhile, Bank of America CEO Brian Moynihan said on Sunday (11/8) that if the Fed does not start cutting interest rates in the near future, US consumers will be disappointed.
“They are telling people that interest rates probably won’t go up, but if they don’t lower them soon, they could end up disappointing the American consumer,” Moynihan said in an interview with CBS.
“Once American consumers really start to get pessimistic, it’s hard to convince them again.” (br/jm)
