Fed Governor Bowman: Inflation remains to be brought under control, but the cost of further policy tightening needs to be weighed.

Federal Reserve Vice Chair for Supervision Michelle Bowman said inflationary pressures persist, while the labor market is stabilizing, leaving room for further declines in inflation. She projected that October’s core PCE price index rose 3.3% year-over-year, driven mainly by higher energy prices and AI-related demand, noting that the lack of progress on inflation is not due to an overheating labor market. Bowman expects core PCE to converge toward the Fed’s 2% target next year as the AI construction boom and pressures from the Middle East conflict gradually ease. On policy, Bowman pointed out that recent declines in stock prices, rising U.S. Treasury yields, and a stronger U.S. dollar have tightened financial conditions, while the economy has strengthened so far this year. She emphasized that financial conditions have already tightened, adding that against this backdrop, the benefits of further monetary policy tightening must be carefully weighed against the costs it would impose on interest-rate-sensitive sectors. Whether AI demand can persist and how geopolitical risks evolve will be key factors shaping monetary policy direction in the coming months. She did not explicitly call for a rate hike, but stressed that the Fed still needs to work to bring inflation back to its 2% target.