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Bowman Sees Fed On Hold With No 2024 Cuts With Inflation Lingering

(Bloomberg) -- Federal Reserve Governor Michelle Bowman said she doesn’t expect it will be appropriate for the Fed to cut interest rates in 2024, pointing to persistent inflation in the first several months of the year.

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Bowman made the comments in a Bloomberg News interview following a speech to bankers in Texas, where she urged the central bank to proceed “carefully and deliberately” as policymakers move toward the Fed’s 2% inflation goal.


“I, at this point, have not written in any cuts” for 2024, Bowman said in the interview, referring to the economic projections officials submit each quarter. “I’ve sort of had an even expectation of staying where we are for longer. And that continues to be my base case.”

A series of policymakers this week have echoed calls for higher-for-longer rates. Dallas Fed President Lorie Logan, speaking in New Orleans Friday, said “it’s just too early to think about cutting rates,” given disappointing inflation data so far this year.

“I need to see some of these uncertainties resolved about the path that we’re on and we need to remain very flexible to policy and continue to look at the data that’s coming in and watch how financial conditions are evolving,” Logan said at the Louisiana Bankers Association Annual Conference.

US central bankers left their benchmark rate unchanged last week at a more than two-decade high, where it’s been since July of last year. Following the decision, Fed Chair Jerome Powell said recent inflation data hasn’t given the committee more confidence that price increases are slowing to 2%. He did not share when he thought the central bank would reduce rates.

Bowman said following three or four months of inflation disappointments, it would take an extended period of time before she would be confident inflation is returning to the 2% target, a precondition for cuts.

“So my expectation would be a number of months of progress,” she said. “And a number of probably meetings as well before I might be comfortable with that.”

Bowman described the US economy as having positive momentum, noting consumer spending has been strong. One caveat to her interest-rate expectation is that an economic shock, if it happened, “would present a case where we would need to address that through monetary policy.”

Chicago Fed President Austan Goolsbee said he doesn’t see much evidence inflation is stuck above the Fed’s target, but was reluctant to say when rate cuts might be appropriate.

“It doesn’t make sense to be tying our hands, even partly, when we know we’re going to get tons of data,” he said at an event Friday hosted by the Economic Club of Minnesota.

Read More: Fed’s Goolsbee Says Not Much Evidence Inflation Stalling Out

Proceeding Carefully

Earlier this week, Boston Fed President Susan Collins said it will take “more time than previously thought” to bring inflation sustainably down to the central bank’s 2% target, and Minneapolis President Neel Kashkari said that rates will likely stay high “for an extended period of time.”

“It is of utmost importance that we maintain credibility in pursuing our fight against inflation by proceeding carefully and deliberately to achieve our 2% goal,” Bowman said in a speech Friday primarily focused on financial and banking regulation in Arlington, Texas.

Speaking to the Texas Bankers Association, Bowman also highlighted risks with commercial real estate — notably offices — as the Covid-19 pandemic has led to more remote work.

“We could see declines in property values, reduced rental income cash flows, or other conditions that could lead to impairment of some banks’ CRE loans or portfolios, especially if those loans mature and are refinanced at higher interest rates,” she said.

--With assistance from Catarina Saraiva and Amara Omeokwe.

(Adds comments from Logan, Goolsbee starting in fifth paragraph)

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