Michelle W Bowman: Brief remarks on the economy and accountability in supervision, applications, and regulation
Speech by Ms Michelle W Bowman, Member of the Board of Governors of the Federal Reserve System, at the American Bankers Association 2025 Conference for Community Bankers, Phoenix, Arizona, 17 February 2025.
The views expressed in this speech are those of the speaker and not the view of the BIS.
Thank you for the invitation to join you here in Phoenix at the ABA's Conference for Community Bankers. For the past seven years, this conference provided an excellent forum for me and bankers to meet and interact with a range of state and federal regulators, policymakers, service providers, and other stakeholders. Today I would like to share a brief update on my views on monetary policy and the economy, before I turn to bank regulatory issues, and describe how I think that regulators should approach the important work of "maintenance" of the regulatory framework.
Economic Outlook and Monetary Policy
Toward the end of last year, the Federal Open Market Committee (FOMC) began the process of moving the target range for the federal funds rate to a more neutral setting to reflect the progress made since 2023 on lowering inflation and cooling the labor market. At our September meeting, the FOMC voted to lower the target range, for the first time since we began tightening monetary policy to combat inflation, by 50 basis points to 4-3/4 to 5 percent.
You may remember that I dissented from that decision, the first time a Fed Governor dissented from an FOMC rate decision in nearly 20 years. I preferred a smaller initial cut to begin the policy recalibration phase. I explained my reasoning in a statement published after the meeting noting that the strong economy and a healthy labor market did not warrant a larger cut. In addition, moving the policy rate down too quickly could unnecessarily risk stoking demand, potentially reigniting inflationary pressures, and could be interpreted as a premature "declaration of victory" on our price-stability mandate.
At the most recent FOMC meeting last month, my colleagues and I voted to hold the federal funds rate target range at 4-1/4 to 4-1/2 percent and to continue to reduce the Federal Reserve's securities holdings. I supported this action because, after recalibrating the policy rate by 100 basis points through the December meeting, I think that policy is now in a good place, allowing the Committee to be patient and pay closer attention to the inflation data as it evolves.