Inflation in the United States remains “uncomfortably” above the Federal Reserve’s target despite progress in recent months, a senior Fed official said.
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“Progress in reducing inflation during May and June is a positive development,” Fed Governor Michelle Bowman said at a conference in Colorado Springs, according to previously drafted remarks.
“But inflation remains uncomfortably above the committee’s 2 percent target,” he said. The U.S. central bank held interest rates at a two-decade high for the past year as it struggled to return inflation to its long-term 2% target following a surge in prices in the era of the Covid-19 pandemic.
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The Fed’s preferred inflation rate now stands at an annual rate of 2.5%, well below the peak reached in 2022, while the US economy continues to grow and the labor market has seen some weakness in job creation.
Against this backdrop, Fed Chairman Jerome Powell suggested in late July that the Fed could go ahead with its first rate cut as early as September if economic data continues to come in as expected.
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But some Fed officials have been more cautious than others in calling for rate cuts. Despite “upside risks,” Bowman said he still expects inflation to moderate in the coming months, but warned policymakers to be patient “and avoid undermining continued progress in reducing inflation by overreacting to a single piece of data.”
