(Bloomberg) -- Federal Reserve Governor Michelle Bowman reiterated that she prefers to lower interest rates cautiously, emphasizing underlying inflation remains “uncomfortably” above the central bank’s 2% goal.
Bowman said upside risks to price growth remain “prominent.” She noted progress on inflation appears to have stalled and indicated she continues to see inflation as a greater concern than the labor market at this time.
“I would prefer that we proceed cautiously and gradually in lowering the policy rate as inflation remains elevated,” Bowman said Friday during a moderated conversation at the Missouri Bankers Association Executive Management Conference.
A slew of policymakers, including Chair Jerome Powell, have advocated for a more cautious approach to rate cuts. Officials will meet Dec. 17-18 to decide whether to lower borrowing costs for a third-straight meeting.
Data out Friday showed both a bounceback in hiring in November and a pickup in the unemployment rate. Bowman said even with the uptick in the jobless rate, unemployment remains historically low.
The job figures, along with fresh inflation figures out next week, will help guide her decision later this month on borrowing costs, she said.
At the central bank’s September meeting, Bowman dissented against the Federal Open Market Committee’s decision to lower interest rates by a half percentage point. She preferred a smaller adjustment.
Higher Neutral Rate
Bowman also expressed doubt on Friday about how much elevated borrowing costs are actually restraining the economy. “We have so much growth right now, it’s hard to think that the level of the interest rates is restrictive at this point,” she said.
The Fed official said she believes the so-called neutral rate — or a stance of policy that neither stimulates nor restrains the economy — has moved higher. Bowman sees that as another reason for caution. Cutting rates too quickly could also spark a wave of investments that might reignite inflation, she said.
It’s important “that we’re thinking about all of that dry powder on the sidelines, and that we’re cautious, and we’re gradually trying to reach that level of neutral,” Bowman said.
