Fed’s Bowman Says Inflation Remains Above Goal, Urges Caution on Tightening

Federal Reserve Vice Chair for Supervision Michelle W. Bowman said inflation pressures remain persistent and urged policymakers to weigh further tightening’s costs as financial conditions have already tightened.

Bowman forecast core PCE inflation would reach 3.3% year over year in October. She said higher energy prices and AI-related demand continued to add upward pressure, alongside tariff effects and the lingering impact of earlier inflation shocks.

Her outlook for next year depended on those shocks fading or unwinding and no inflationary pressure emerging from the labor market. Bowman said AI-related inflation pressures still appeared to persist, though there were early signs of slowing, while energy pressures should unwind when the Middle East conflict ends. Under those conditions, she expected core PCE inflation to move closer to 2% next year.

Bowman cited lower equity prices, higher private interest rates and a stronger dollar as signs of tighter financial conditions. She said the economy had strengthened this year and that policymakers should weigh the benefits of further tightening against its costs for interest-sensitive industries.

Bowman did not explicitly call for a rate increase. She said returning inflation to the Fed’s 2% goal remains necessary, with AI demand and geopolitical risks likely to influence policy in the coming months.