An interest rate decision is once again a stumbling block for the Federal Reserve. According to the regulator, the US economy is not yet ready for a rate cut.
Federal Reserve Governor Michelle Bowman believes that it is still premature to lower the benchmark rate. This echoes previous statements by Fed Chairman Jerome Powell.
In her speech, Bowman outlined several risks that could exacerbate inflation, reaffirming that it is not yet time to start cutting interest rates. According to her, rushing into such a decision could prompt the Fed to raise rates again to bring inflation back to the 2% target. "We are still not yet at the point where it is appropriate to lower the policy rate," Bowman added.
Earlier, Jerome Powell signaled that US authorities would need more time than previously anticipated to gain enough confidence to begin lowering interest rates. Commenting on the recent decision to leave the key rate unchanged at 5.25%-5.50%, the head of the US central bank emphasized that the regulator would be open to keeping monetary policy tight "for as long as it takes to get inflation down."
US monetary authorities remain extremely cautious in light of the decisions being made in Europe. In June, the ECB agreed to ease monetary policy after nine months of holding rates steady. The European regulator lowered rates on main refinancing operations, marginal lending facility, and deposit facility to 4.25%, 4.5%, and 3.75% respectively. Following suit, the Swiss National Bank delivered two rate cuts, bringing its benchmark rate down to 1.25%.