Fed's Bowman voted against jumbo cut to avoid signaling victory on inflation

Investing.com -- Fed Governor Michelle Bowman said Friday that she voted against the central bank's decision to begin the rate-cutting cycle with jumbo cut to avoid stoking expectations that the Fed has won its battle against inflation.

Bowman agreed that it was "appropriate to recalibrate the level of the federal funds rate," but said "a smaller first move in this process would have been a preferable action," amid worries that the larger cut could be misinterpreted as a "premature declaration of victory on our price stability mandate."

Bowman was the sole voting Fed member who voted against the Fed's 50 basis point cut in September in favor of a lesser 25bps cut. 

The Fed governor backed a more gradual approach to rate cut as it would "avoid unnecessarily stoking demand," at a time when the Fed hasn't yet achieved its target to bring down inflation to 2%. 

"Inflation remains above our 2 percent goal, as core personal consumption expenditures prices are still rising faster than 2.5 percent from 12 months earlier," Bowman said. 

The outlook on the labor market remains muddy at best, Bowman suggested, driven by "increased measurement challenges and the inherent difficulty in assessing the effects of recent immigration flows."

Still, a slowing labor market was key, the fed governor added, to "help bring wage growth down to a pace consistent with 2 percent inflation given trend productivity growth."