Fed Governor: Inflation Still at ‘Uncomfortable’ Level

Despite some progress, Federal Reserve Governor Michelle Bowman says inflation remains “uncomfortably above” 2%.

“Should the incoming data continue to show that inflation is moving sustainably toward our 2% goal, it will become appropriate to gradually lower the federal funds rate to prevent monetary policy from becoming overly restrictive on economic activity and employment,” Bowman said in a speech Saturday (Aug. 10).

“But we need to be patient and avoid undermining continued progress on lowering inflation by overreacting to any single data point,” added Bowman, whose comments before the Kansas Bankers Association were reported by Reuters.

In July, the Fed kept its policy rate at the 5.25%-5.5% range it has held for more than a year but indicated a rate cut could come as soon as next month if inflation keeps cooling. Bowman said during her speech that the Fed will — by next month — have more economic data along with a better idea of how recent market volatility could impact the economic outlook.

Bowman’s comments come in the wake of recent observations from the likes of JPMorgan CEO Jamie Dimon and shipping giant Maersk that fears of a recession may be unwarranted.

While low-income consumers may be scaling back their spending and wealthier consumers exhausting their excess funds, Dimon said that even as credit trends normalize, a near-term recession does seem to be on the horizon.

Asked by CNBC last week about the fact that just a few months ago the market was “pricing in” a soft landing at about a 70% probability — and Dimon’s own estimation was about half that — the CEO said chances of that soft landing is still “about the same,” while conceding that there remains the possibility of “a large range of outcomes.”

In addition to the uncertainties tied to geopolitics and deficit spending, among other factors, he said he remains “a little bit of a skeptic” about the possibility of inflation reaching 2%.

Also last week, Maersk CEO Vincent Clerc told CNBC that his company has seen no signs of a U.S. recession, based on demand for shipping containers, the amount of goods being stored before delivery or processing, and the number of purchase orders from importers.

He added that the company has been surprised by the sturdiness of container volumes in recent years, and that Maersk expects that to continue over the coming quarters, with no indication that the global economy is moving toward a recession.