Michelle W Bowman: Reflections on the economy and bank regulation

Speech by Ms Michelle W Bowman, Member of the Board of Governors of the Federal Reserve System, at the Florida Bankers Association Leadership Luncheon Events, Miami, Florida, 27 February 2024.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Central bank speech  | 
01 March 2024

I would like to thank the Florida Bankers Association and your new President and CEO, Kathy Kraninger, for the invitation to share my thoughts with you today. It is really a pleasure to join you here in Florida to discuss current trends in bank regulation, and to learn the issues on your mind, especially about the path of regulatory reform, and your views on local banking and economic conditions in the communities you serve. I find great value in spending time outside of Washington, D.C. These conversations provide valuable insights to inform my work at the Federal Reserve - both for my understanding of the economy and the banking environment.

Before discussing bank regulation, I would like to briefly touch on the economy and monetary policy.

Monetary Policy

Over the past two years, the Federal Open Market Committee has significantly tightened the stance of monetary policy to address high inflation. At our most recent meeting in January, we voted to continue to hold the federal funds rate target range at 5-1/4 to 5-1/2 percent and to continue to reduce the Federal Reserve's securities holdings.

We have seen progress on inflation over the past year, with the 12-month readings through December of total and core personal consumption expenditures (PCE) inflation both below 3 percent for the first time since the spring of 2021. However, the latest consumer price index (CPI) and producer price index (PPI) inflation data through January suggest slower progress in bringing inflation down toward our 2 percent target. Throughout this time, economic activity has remained strong with ongoing strength in consumer spending. We had also seen signs of the labor market coming into better balance, but recent strong jobs reports-including upward revisions to employment growth-show a continued tight labor market. Last year, the average pace of job gains slowed and the labor force participation rate rose through November, with the unemployment rate edging up to 3.7 percent. In recent months, however, job growth has rebounded and the labor force participation rate declined, retracing some of its earlier gains.