Fed Governor Bowman says she remains open to raising interest rates if inflation does not improve

The comments reflect prevailing sentiment at the central bank, with most policymakers saying in recent weeks that while they still expect inflation to return to the Fed’s 2% target, they need more evidence.

Recent readings showed inflation moderating, with the Fed’s preferred indicator at just under 3%. However, the Federal Open Market Committee, which sets interest rates, noted after its last meeting that there had been only “modest additional progress.”

Bowman noted that there are “a number of upside risks” prevailing that could accelerate her forecasts, which are among the most stringent among all policymakers.

“I remain willing to raise the target range for the federal funds rate at a future meeting if progress in inflation stalls or even reverses,” she said. “Given the risks and uncertainties of my economic outlook, I will remain cautious in my approach to considering future changes in policy stance.”

On Friday, the Commerce Department will release its reading of the Personal Consumption Expenditures price index for May, the Federal Reserve’s preferred measure of inflation. Economists surveyed by Dow Jones expect 12-month inflation to reach 2.6% across all items and core, which excludes food and energy prices.

While that would represent a smaller boost compared to April, Bowman said she still expects the Fed to keep its key overnight borrowing rate in a range of 5.25% to 5.5% “for some time.”

Moreover, it noted that it is not affected by interest rate cuts from the Fed’s global counterparts such as the European Central Bank, which recently cut key interest rates by a quarter of a percentage point. “It is possible that in the coming months the course of monetary policy in the United States will deviate from the path of other advanced economies,” Bowman said.

Bowman’s comments come as other officials said Monday they were hesitant about the reduction.

San Francisco Federal Reserve Bank President Mary Daly rejected the idea of ​​a pre-emptive cut to hedge against a deterioration in the labor market and a slowdown in the economy.

“I think pre-emptive reduction is something you do when you see risks,” Daly told CNBC’s Deirdre Bosa during a public event in San Francisco. “We will be resolute until we finish the job. That’s why not taking pre-emptive action when it’s not necessary is so important.”

Also, Chicago Fed President Austan Goolsbee told CNBC’s Steve Liesman earlier in the day that if he saw “more months” of good inflation data, he would question whether policy needed to be as restrictive as it has been, This paves the way for cuts.