Federal Reserve Governor Michelle Bowman Supports Interest-Rate Cut

(Reuters) – Federal Reserve Governor Michelle Bowman on Thursday expressed her support for last month’s interest-rate cut, describing it as the “final step” in the U.S. central bank’s recalibration of monetary policy. She emphasized that with rising inflation risks, a cautious approach is necessary moving forward.

> “We should also refrain from prejudging the incoming administration’s future policies,” Bowman stated in prepared remarks for the California Bankers Association in Laguna Beach, California. “Instead, we should wait for more clarity and then seek to understand the effects on economic activity, the labor market, and inflation.”

These remarks mark Bowman’s first public comments since emerging as a leading candidate to become the Fed’s next top banking regulator, following Michael Barr’s announcement of his resignation as Fed vice chair of supervision by the end of next month. Bowman was nominated to her current position by Donald Trump during his first term.

Bowman has been critical of Barr in recent years and would likely adopt a less stringent approach if appointed to the new role.

> “This year will see a transition in leadership at the banking agencies, and I expect that this will translate into a shift in priorities and approach,” she noted, reiterating her calls for more tailored regulations and a pragmatic approach to policymaking.

Bowman suggested that the relationship between banks and regulators should not be adversarial. Instead, both parties generally share the goal of maintaining a safe, sound, and effective banking system, with each playing a vital role.

On monetary policy, Bowman noted her reservations regarding inflation, stating that progress may have stalled and flagging potential risks such as the pent-up demand following the November presidential election.

She remarked that rising stock prices could be affecting inflation progress and indicated that the increase in the yield on the 10-year Treasury note is partly tied to inflation concerns.

> “I continue to prefer a cautious and gradual approach to adjusting policy,” she said.

In September, Bowman was the first Fed governor to dissent on monetary policy since 2005, expressing her disagreement with the substantial reduction of short-term borrowing costs. On Thursday, she suggested that she might have backed an inaction stance in December.