Watch out for falling interest rates, eyes on upside inflation risks

Federal Reserve Governor Michelle Bowman said on Sunday she still sees upside risks to inflation and continued strength in the labor market, noting the Fed may not be ready to cut rates at the next US central bankers meeting in September, according to Bloomberg .

Key quotes

“Progress in reducing inflation in May and June is a welcome development, but inflation is still uncomfortably above the committee’s 2% target.”

“I will remain cautious in my approach to considering adjustments to the current policy position.”

“If incoming data continue to show that inflation is moving sustainably toward our 2 percent objective, it will become appropriate to gradually lower the federal funds rate to prevent monetary policy from becoming excessively restrictive on economic activity and employment.”

“But we must be patient and avoid undermining continued progress in reducing inflation by overreacting to any single data point.”

“With some upside risks to inflation, I still see the need to pay close attention to the price stability side of our mandate, while keeping an eye on the risks of significant labor market weakness.”

Market reaction

The US Dollar Index (DXY) is trading 0.08% higher on the day at 103.23 at the time of writing.