Bowman says bringing inflation down remains a priority ahead of the December meeting

Federal Reserve Vice Chair for Supervision Michelle W. Bowman said on 10 November that "bringing inflation down remains a priority," after arguing that progress on price stability has disappointed even as the labor market has improved more than she expected. In prepared remarks at the Council on Foreign Relations in Washington, she said the views were her own and not necessarily those of her colleagues on the Federal Open Market Committee or the Board of Governors. She later delivered the same remarks at an Unleash Prosperity Now event, the Fed's page said.

Bowman said she joined colleagues at last month's FOMC meeting in holding the federal funds rate target range at 3-3/4 to 4 percent, because she wanted a better reading of incoming data and of how the most recent rate increase was feeding through. She said several factors lifting inflation should ease next year, but that inflation "has proven to be more persistent than I had anticipated."

On activity, she said real GDP rose 2.4 percent in the first half of the year and likely increased at a pace of more than 3 percent in the third quarter, supported by AI-related capital spending and solid consumer spending, while residential investment has declined. She put the unemployment rate at 4.1 percent in October, close to her estimate of its natural rate, and said job gains had averaged about 80,000 a month through October. Wage growth, measured by the employment cost index wages-and-salaries component and by average hourly earnings, had slowed to 3.1 percent on a 12-month basis, she said.

On prices, Bowman said "today's consumer price index data suggest that 12-month core PCE inflation likely moved up further to 3.3 percent in October," and that "progress on lowering inflation has stalled over the past two years or so." She attributed roughly three-quarters of above-target core PCE inflation in the 12 months to September in equal parts to tariffs, energy and AI-related price pressures, with the rest from earlier shocks. She said she mostly views those as relative price shocks, and that her forecast is for core PCE inflation to move closer to 2 percent next year as they wane, with no inflationary pressure emerging from the labor market.

She also said financial conditions had tightened a bit, with lower equity prices, higher private interest rates and a stronger dollar, and that she is watching financing for the AI buildout, including her estimate that AI-related debt is on track to exceed $800 billion this year. Monetary policy, she said, "is not on a preset course." Before the December meeting the Fed will receive the October PCE report and the November employment report. "Today, I am seeing signs that inflation pressures are persisting, while labor market conditions appear to be firming. This indicates that there is still work to do to bring inflation closer to 2 percent."

Bowman did not, in these remarks, call for a specific December rate change.