Fed Governor Bowman: "Already cut 75 bp last year...need to watch conditions for now"

Michelle Bowman, a governor at the US Federal Reserve (Fed), said the decision to hold the policy rate steady in January was “a close call.”

According to Walter Bloomberg on the 30th (local time), Bowman said the rate hold was a choice made to review more economic data, but “it was by no means an easy decision.” She explained that while “the current monetary policy stance is moderately restrictive,” the Fed “has room to watch conditions for the time being because it already implemented 0.75 percentage point (75 bp) of rate cuts last year.”

This aligns with the rationale Chair Jerome Powell presented on the 28th for holding rates. At a press conference following the January Federal Open Market Committee (FOMC) meeting, Powell said he judged “the current stance of monetary policy to be appropriate to achieve maximum employment and the 2% inflation goal.”

Powell noted that while the unemployment rate in December was steady at 4.4% with no major change in recent months, inflation has eased from its 2022 peak but remains somewhat above the target (2%). He said the Fed opted to maintain the status quo in a situation where it is difficult either to cut rates quickly to protect employment or to tighten further to rein in inflation.

Bowman also pointed to uncertainty in the labor market as a key policy variable, reinforcing Powell’s cautious approach. She said that although initial jobless claims are low, the labor market remains fragile, with layoffs increasing, and emphasized that “if labor market conditions deteriorate, we are prepared to adjust policy.”

However, she maintained an optimistic view on the inflation outlook. Bowman added that she remains confident inflation is falling toward the 2% target.