A governor of the American central bank (Fed) judged on Friday that it was still too early to consider starting to lower the main key rates, warning of the risks which threaten the trajectory of prices.
If the data continues to indicate that inflation is moving sustainably towards our 2% objective, it will then become appropriate to gradually lower our key rate to prevent monetary policy from becoming too restrictive. In my opinion, we are not there yet, declared Michelle Bowman, in a speech.
The Fed maintained its main key rate in the range of 5.25-5.50% on Wednesday, the outcome of its monetary policy meeting. After having raised them 11 times in the face of high inflationit anticipates several declines in 2024, but has procrastinated on the start of this movementdeeming it necessary to be certain that inflation returns to an acceptable level in the long term.
A number of risks remain
A certain number of risks remain, likely to push inflation up again, stressed Michelle Bowman. She mentioned the geopolitical situation, as well as the fact that lowering rates too soon can cause prices to start rising again.
She also warned of the risk that persistent tensions in the labor market could lead to persistent and high service inflation. In January, in fact, 353,000 jobs were created in the United States, twice as many as expected. The unemployment rate remained stable at 3.7%. Michelle Bowman wanted to be cautious.
Although the current monetary policy stance appears restrictive enough to bring inflation back to 2%, I remain prepared to raise rates at a future meeting if the data indicates that inflation progress is stalled or reversedshe warned.
The PCE inflation index, a measure favored by the Fed and which it wants to bring back to 2%, remained 2.6% over one year in December, but, excluding food and energy, fell to 2.9%, its lowest level in almost three years. It is even lower than the objective of 2% in evolution over three and six months at an annualized rate, that is to say if the rate observed over these periods was projected over a full year.
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