In This Article:
Just before Joe Biden leaves the White House and Donald Trump returns, two prominent Republican members of the Federal Reserve Board are weighing in on how fast interest rates should come down.
The two — Michelle Bowman and Christopher Waller — say rates can come down in a measured way. That is, so long as there's more progress in getting inflation down to the Fed's goal of 2% a year.
Related: Analysts reboot Amazon stock price targets on AWS, RTO updates
Based on the minutes of the Fed's Dec. 17-18 meeting, released on Jan. 8, both are firmly in the camp of not hurrying.
The two offered their views in speeches this week. Bowman spoke Jan. 9 at a California Bankers Association meeting in Laguna Beach, Calif. Waller's remarks came Jan. 8 in Paris at a meeting of the Organization for Economic Cooperation and Development.
Both voted for the Fed's December decision to trim its key short-term Federal Funds Rate to a range of 4.25% to 4.5%. In summer 2023, the rate was 5.25% to 5.5%.
But as the Fed was cutting the Federal Funds Rates, long-term-bond yields have gone up.
Bowman notably dissented on the Fed's September rate-cut decision (to 4.75% to 5%), its first rate cut since 2000.
That dissent was the first in any Fed rate decision in 20 years. Bowman worried that the September rate cut was too big and risked reigniting inflation.
Waller had been comfortable about cutting rates in September (and the two since) because he says some inflation measures don't measure actual prices but impute prices and thus overstate the inflation reality.
Related: Popular retail CEO delivers blunt words about key Amazon business
Two ways of looking at rate cuts
That said, both Fed governors believe rates can come down if the data support the idea.
Waller may be more confident more cuts are ahead, perhaps because his perspective comes from years working in the Federal Reserve system. He was executive vice president of the Federal Reserve Bank of St. Louis and helped turn the bank's data repository — Federal Reserve Economic Data or FRED — into an internationally known economic resource.
Bowman is a bit more cautious. She spent several years working at a small Kansas bank her family has owned for more than 140 years. Then, she was tapped to be Kansas Banking Commissioner.
She is laser-focused on inflation stickiness. Inflation has come down to 2.6% to 3% from highs seen in 2022. But for Bowman, 2% is the goal.
And she told the California group, "Given the lack of continued progress on lowering inflation and the ongoing strength in economic activity and in the labor market, I could have supported taking no action at the December meeting."
