More progress in the necessary inflation before more tariff cuts

The governor of the Federal Reserve, Michelle Bowman, said Monday that, although the monetary policy “is now in a good place”, wants to see that the data reflect more progress in inflation before further reducing interest rates.

“I would like to gain greater confidence that the progress in the reduction of inflation will continue as we consider making more adjustments to the target range,” Bowman said in a speech in the American banker association.

The increase in inflation in the prices of basic goods since the past spring has slowed progress, Bowman said. While he expects inflation to continue slowing down this year, he said that deflation “can take more time than we expect.”

“I still see greater risks for pricing stability, especially while the labor market is still strong,” Bowman said.

The most recent Consumer Price Index He showed that inflation lasted higher than expected in January, increasing 0.5% month to month versus the estimation of Dow Jones that requires an increase of 0.3%. This put the annual inflation rate at 3%, which a previous consensus is made for 2.9%

The Fed maintained its objective rate in a range of 4.25% to 4.5% at its January policy meeting.

Bowman said Monday that the current level is appropriate to “allow the committee to be patient and pay more attention to inflation data as it evolves.”

“The current policy position also provides the opportunity to review more indicators of economic activity and obtain more clarity on administration policies and its effects on the economy,” Bowman continued.

President Donald Trump’s tariffs against the largest commercial partners of the United States have expressed concerns among higher price economists. The expectations of more interest rate cuts in 2025 have weakened in Trump’s commercial war. Merchants currently have a single reduction in the point percentage point rate this year, according to CME group data.