(Bloomberg) -- Federal Reserve Governor Michelle Bowman said cutting interest rates by a half percentage point this week risked signaling the US central bank was declaring victory over inflation too early.
“The committee’s larger policy action could be interpreted as a premature declaration of victory on our price stability mandate,” Bowman said in a statement released Friday. “I believe that moving at a measured pace toward a more neutral policy stance will ensure further progress in bringing inflation down to our 2% target.”
Bowman became the first Fed governor to dissent against an interest-rate move since 2005, when she voted against her colleagues’ decision to lower rates by 50 basis points Wednesday. She indicated at the time she preferred a quarter-point cut. The vote on the Federal Open Market Committee was 11-1.
Earlier on Friday, Fed Governor Christopher Waller said favorable inflation data in recent weeks is what caused him to support the larger-sized cut. In an interview on CNBC, he said he now estimates that the Fed’s favored gauge of inflation — the personal consumption expenditures price index — has risen over the last three months at an annualized rate of less than 1.8%, which is below the Fed’s target of 2%.
“What’s got me a little more concerned is inflation is running softer than I thought,” he said.
Solid Spending
By contrast, Bowman said she’s still worried that robust demand could continue to drive price gains.
“I am also taking signal from continued solid growth in the spending data, especially consumer spending, reflecting a healthy labor market,” she said. “Inflation remains above our 2% goal, as core personal consumption expenditures prices are still rising faster than 2.5% from 12 months earlier.”
(Updates with Waller comments from fourth paragraph.)
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