Michelle Bowman, Fed vice chair for supervision, said inflationary pressures
persist while the labor market is stabilizing and inflation still has room to
fall. She expects October core PCE YoY to rise to 3.3%, driven mainly by
energy-price increases and AI-related demand, and said the lack of progress on
inflation is not due to an overheated labor market. Bowman said core PCE could
move toward 2% next year as AI-related construction demand cools and Middle East
conflict pressures ease. She warned recent equity declines, higher Treasury
yields and a stronger dollar have already tightened financial conditions, and
the economy has strengthened year-to-date. Any further policy tightening must be
weighed against costs to interest-rate-sensitive sectors; persistence of AI
demand and the path of geopolitical risk will be key near-term determinants of
policy. She did not explicitly call for rate hikes but stressed the Fed must
still drives inflation back to 2%.
