While the economy and labor market have shown signs of resilience, the U.S. has made only modest strides in lowering inflation this year, justifying the need to keep restrictive monetary policy in place for the time being, two Federal Reserve officials said Tuesday.
The separate speeches by Federal Governors Lisa Cook and Michelle Bowman both offered little insight into when policymakers would be comfortable enough to adjust the benchmark rate of 5.25% to 5.5%, citing too many uncertainties in the economy. Investors have pinned hopes of a rate trim in September, but it’s too soon to determine whether officials will have enough data-driven confidence to pull the trigger.
The wait-and-see messaging from Cook and Bowman echoed similar language used by their colleagues in public remarks over the past week.
“Should the incoming data indicate that inflation is moving sustainably toward our 2% goal, it will eventually become appropriate to gradually lower the federal funds rate to prevent monetary policy from becoming overly restrictive,” Bowman said in an address at the Policy Exchange think tank in London. “However, we are still not yet at the point where it is appropriate to lower the policy rate.”
In her remarks to the Economic Club of New York, Cook forecasted that short-term inflation rates will continue to move lower “on a bumpy path” before slowing more sharply in 2025 and said officials’ current economic policy “is well positioned to respond as needed to any changes in the economic outlook.”
“With disinflation continuing, albeit at a slower pace this year, and the labor market having largely normalized, I see the risks to achieving our employment and inflation goals as having moved toward better balance,” Cook said. “Given our data dependence, we will closely monitor incoming information to determine the future path of policy.”
On Monday, Federal Reserve Bank of Chicago President Austan Goolsbee said while the current restrictive monetary policy is in place to “guard against overheating,” leaving it in place could lead to risks the policy is slowing the economy down too much.
Gold and silver continued to slide in midday trading Tuesday. The yellow metal was down $12.16 at $2,318 per ounce, and silver dipped $0.63 at $28.90.
