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Fed Governor Michelle Bowman Adjusts Stance on Rate Hikes

2024.01.09

 

Key Takeaways

  • Fed Governor Michelle Bowman indicates a potential pause in interest rate hikes.
  • Bowman emphasizes caution, stating it’s not yet time for rate reductions.

Bowman’s Shift in Monetary Policy Stance

Federal Reserve Governor Michelle Bowman, known for her firm stance on tight monetary policy, has shown a change in perspective, suggesting that the era of aggressive interest rate hikes might be coming to an end. Speaking at a private event in South Carolina, Bowman acknowledged the progress in combating inflation and hinted that maintaining the current rate could further aid in bringing inflation closer to the Fed’s 2 percent goal.

Rate Hike Pause, But No Cuts Yet

While Bowman’s comments indicate a potential pause in rate hikes, she emphasized that it is not yet time to consider rate cuts. Despite the positive trend in inflation reduction, she pointed out that there are still significant risks of inflation surging. Bowman’s remarks come after the Federal Open Market Committee’s decision in December to maintain the federal funds rate at 5.25%-5.5%.

Fed’s Future Policy Direction

The Federal Reserve’s minutes from their December meeting didn’t specify a timeline for potential rate cuts, reflecting the uncertain economic landscape. However, committee members projected the possibility of three-quarter percentage point rate cuts in 2024. Bowman stressed the need for a cautious approach in future policy changes and a readiness to adjust strategies if inflation trends shift.

Market Expectations and Fed’s Next Steps

As the Federal Reserve prepares for its next meeting on January 30-31, market expectations lean towards a continuation of the current rate, followed by rate cuts starting in March. The market, tracked by the CME Group’s FedWatch tool, anticipates a total reduction of 1.5 percentage points in rates this year, equivalent to six cuts.

 


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