Fed's Bowman says inflation fight unfinished as October prices rise 0.4%
Federal Reserve Vice Chair for Supervision Michelle Bowman said the battle against inflation is not over, hours after October consumer prices rose 0.4% on the month, beating forecasts and extending an upward trend. She stopped short of backing a December rate rise, but said her focus has moved from employment to price stability.
"Today, I am seeing signs that inflation pressures are persisting, while labor market conditions appear to be firming. This indicates that there is still work to do to bring inflation closer to 2%," Bowman said in a speech at the Council on Foreign Relations. She said inflation has been "more persistent" than she anticipated and has "shown recent signs of broadening", adding that "today's consumer price index data suggest that inflation pressures may persist for longer."
Bowman split the drivers of price growth into four: high energy costs, tariffs, artificial intelligence-related price pressures and "persistent effects from the inflationary shocks in recent years". She expects the first three to fade, but warned it is important to ensure inflationary pressures "do not intensify, further broaden, or become embedded in consumer and business expectations".
Her caution contrasts with two other voting members of the Federal Open Market Committee. Governor Christopher Waller said a 25 basis point rise "would put our credibility at risk", signalling support for 50 basis points if monthly inflation exceeded 0.3%. Dallas Fed President Lorie Logan said the FOMC "needs to implement at least two more 25-basis-point rate increases", arguing the current 3.75% to 4% range leaves the real rate below neutral.
Bowman instead weighed the cost of tightening further, noting that rising private interest rates and falling equity prices could act as a natural corrective. "Lower equity prices could undermine the resilience in consumer spending and higher interest rates could further strain interest-rate-sensitive sectors of the economy, like housing and small business investment," she said. She also flagged that disruption in the AI sector could reach the banking system, saying complex financing structures make counterparty risk hard to assess.
What it means for Pakistan: A higher-for-longer Fed path keeps the dollar firm and narrows the room for the State Bank of Pakistan to cut its own policy rate, which matters for borrowers and for the cost of servicing external debt. It also weighs on remittances from Pakistani workers in the United States and the Gulf, and on the dollar value of crypto and stablecoin holdings many Pakistanis use for savings and cross-border transfers.
