Fed members Raphael Bostic and Michelle Bowman commented on US interest rates policy and economic conditions today. Those remarks were quite 'surprisingly' dovish. We can assume that the stagflation risk emerges across the US economy.
Bostic:
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“Right now I think the neutral real rate is around 1.25%. It’s possible the neutral rate is rising.”
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“The risks to employment are comparable to inflation risk.”
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“Sentiment around risks to employment has gone up a lot.”
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“The story we hear from businesses is they are not hiring and not firing.”
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“The job market slowdown is a little of both supply and demand.”
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“We need to pay very close attention to consumer psyche.”
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“I think there is more inflation to come.”
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“Firms are feeling cost pressures and limits to not passing them on.”
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“Tariff impact thus far is more muted on inflation than expected.”
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“We should be concerned about inflation given how long it’s been above target.”
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“I could support a 1.75% to 2.25% inflation target range at some point down the road.”
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“I would be open to using an inflation target range.”
Bowman:
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“I see 3 cuts in total for 2025.”
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“Views on the economy and monetary policy.”
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“I am concerned that housing weakness could lead to an accelerating drop in values.”
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“Labor market could deteriorate fast in coming months.”
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“Tariff impact on inflation will fade, inflation is otherwise near target.”
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“If demand conditions do not improve, businesses may begin laying off workers.”
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“I expect last week’s cut to be a first step towards a more neutral rate if the economy evolves as expected.”
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“Important that recent statement included a forward-looking view for further cuts.”
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“I’m worried the Fed is behind the curve on labor market weakness; policy may need to adjust faster if risks materialize.”
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“I supported a quarter-point cut but it is important the Fed now proactively support the job market.”
