Fed policy rate appears ‘sufficiently restrictive’: Bowman

(Reuters) -Federal Reserve Governor Michelle Bowman on Monday retreated from her persistently hawkish view, saying she now sees U.S. monetary policy as “sufficiently restrictive” and signaled her willingness to support eventual interest-rate cuts as inflation eases.

“My view has evolved to consider the possibility that the rate of inflation could decline further with the policy rate held at the current level for some time,” Bowman said in remarks prepared for delivery to the South Carolina Bankers Association 2024 Community Bankers Conference.

Bowman had previously indicated she felt another rate hike would likely be needed to beat inflation, which by the Fed’s preferred measure has fallen from 40-year highs in 2022 to around 2.6% as of November.

“Should inflation continue to fall closer to our 2 percent goal over time, it will eventually become appropriate to begin the process of lowering our policy rate to prevent policy from becoming overly restrictive,” Bowman said.

The Fed last month held its policy rate steady in the 5.25% to 5.5% range, where it has been since last July, and signaled that its next move could be a reduction in the policy rate sometime in 2024.

Bowman’s comments Monday suggest she is on board with that view, though she said she remained vigilant about risks that could push inflation back upward – including geopolitics, a recent easing in financial conditions and labor market tightness that could keep services inflation too high.

“While the current stance of monetary policy appears to be sufficiently restrictive to bring inflation down to 2 percent over time, I remain willing to raise the federal funds rate further at a future meeting should the incoming data indicate that progress on inflation has stalled or reversed,” Bowman said.

(Reporting by Ann Saphir; editing by Jonathan Oatis and Deepa Babington)