Federal Reserve Governor Michelle W. Bowman said the central bank's policy stance remains appropriate following the Federal Open Market Committee's decision to maintain the federal funds rate at 4.25% to 4.50% while continuing to reduce securities holdings.

Bowman said at The New England CEO Summit in Portsmouth, New Hampshire, that even if inflation is slowing down in 2023, core inflation is still high thus monetary policy has to stay cautious.

Bowman calculated that, down from 3.0% at the end of 2023, the 12-month core personal consumption expenditures inflation rate most likely stayed constant at 2.8% in December. Although inflation has shown indications of slowing down, she cautioned of upside risks resulting from geopolitical concerns and supply chain interruptions. She underlined that evaluating the speed of price stability improvements will depend mostly on first-quarter inflation figures.

With average payroll additions in the fourth quarter of 2024 of 170,000, the job market is still robust. In December, the jobless rate moved slightly back down to 4.1%. But job searchers are finding jobs later, which reflects changes in labor market dynamics. Although consumer mood has improved, it is still below pre-pandemic levels; increasing housing, food, and energy prices disproportionately impact lower-income families.

Bowman underlined the necessity of closely observing market signals before changing policies as easing financial conditions over the previous year may have slowed down inflation development. She also discussed regulatory issues facing mutual and community banks, stressing their problems obtaining capital given their depositor-owned arrangement. She said that mutual capital certificates may provide a fix and supported legislative clarification on whether these tools count as capital.

She questioned the yearly need for mutual holding companies to get regulatory permission to exclude profits paid by their subsidiary banks. She said, the procedure hinders small institutions' capacity to invest in nearby areas and causes unneeded expenses. She underlined her need for a customized legislative strategy and warned against general guidelines for banks of different sizes. She cited current laws such the Community Reinvestment Act rule, which imposes consistent evaluation criteria on banks with assets ranging from $2 billion to $2 trillion.

Bowman expressed worries about the growing frequency of check fraud and said that authorities have been reluctant to react to the problem. To fight dishonest behavior disproportionately affecting underprivileged groups, she urged more cooperation among law enforcement and regulatory authorities. She underlined for community banks the need of cybersecurity and the Federal Reserve's programs—including the Midwest Cyber Workshop—to increase resilience against cyberattacks. She pointed out that smaller banks often find it difficult to keep the required tools to offset cybersecurity concerns and urged legislative help in order to solve these difficulties.

Looking forward, Bowman underlined that choices on monetary policy would still be based on facts; future rate changes will rely on inflation trends, labor market conditions, and more general economic growth. Given two inflation and employment data coming before then, the FOMC's March meeting will provide more information.