The Fed's most "hawkish" official Bowman: The interest rate should not be cut by 50 basis points. Inflation is still above the target level

Last Friday (September 20), Federal Reserve Board member Bowman said she did not agree with the Fed's 50 basis point rate cut, but preferred a 25 basis point rate cut because inflation was still above the target level of 2%, which might make the public think that the Fed had prematurely declared victory over inflation.

The Federal Reserve announced a 50 basis point rate cut last Wednesday, lowering the target range of the federal funds rate to 4.75%-5.00%, exceeding some market expectations. The Federal Open Market Committee (FOMC) voted 11 to 1 on this interest rate decision. Bowman was the only official who opposed the 50 basis point rate cut. She was also the first Federal Reserve Board member to vote against the interest rate decision since 2005.

Bowman reiterated her view that she was inclined to cut interest rates by 25 basis points. "More substantial policy action by the committee could be interpreted as a premature declaration of victory in our efforts to stabilize prices," she said in a statement. "I believe that a measured pace toward a more neutral policy stance will ensure further progress toward our 2% inflation target," she said. "Such an approach would also avoid unnecessarily stimulating demand," she said. Bowman, the most hawkish Fed official at the moment, insisted as recently as June that there would be no rate cuts this year. Bowman said she remains concerned that strong demand could continue to push prices higher. She cited data saying, "I also get signals from continued solid growth in spending data, especially consumer spending, which reflects the health of the labor market. Inflation remains above our 2% target as core personal consumption expenditure prices are still rising 2.5% faster than they were 12 months ago." The inflation measure Bowman cited is the personal consumption expenditures (PCE) price index, which Fed officials consider the core PCE price index as the preferred inflation measure, and policymakers' so-called 2% long-term inflation target is based on the core PCE data. The monthly PCE data of the United States is usually released at the end of the next month, so the latest PCE data is still a report reflecting the situation in July.

Previously released data showed that the US PCE price index rose by 0.2% month-on-month and 2.5% year-on-year in July; after excluding factors with large fluctuations such as food and energy, the core PCE price index in July rose by 0.2% month-on-month and 2.6% year-on-year.