Federal Reserve Speeches·May 29, 2026, 9:10 AM ET

Bowman, A Framework for Practical Monetary Policy Decision Making

Federal Reserve Board member Michelle W. Bowman addressed the Central Bank of Iceland's Reykjavík Economic Conference to outline her decision-making framework for setting the federal funds rate.
The FOMC pursues the dual mandate of maximum employment & price stability using the federal funds rate as its primary policy tool.
Bowman's assessment relies on analyzing real GDP, private domestic final purchases, unemployment rates, payroll employment, wage growth, & the natural rate of unemployment.
For inflation, she prioritizes core PCE inflation & trimmed mean PCE inflation to filter out volatile food & energy prices, while excluding temporary factors like tariffs.
She emphasizes engaging with private sector contacts to gain forward-looking insights beyond lagging official data.
Policy adjustments are determined by comparing the current rate to the neutral rate of interest to assess whether the stance is restrictive, accommodative, or neutral.
In cases of conflict between employment & inflation goals, she advocates for a flexible approach that addresses the objective deviating most from its target.
During the second half of 2019, she supported rate cuts to address a fragile labor market & inflation near 2 percent.
She dissented in July 2025 to support a 25 basis point rate cut due to slowing growth & rising unemployment, later supporting additional cuts in September, October, & December 2025.
In 2022, she strongly supported aggressive rate hikes to combat persistent inflation & a tight labor market.
In 2023, she supported smaller, measured rate increases as the policy stance was already restrictive.
Currently, the U.S. economy shows resilient GDP growth driven by AI-related investment, though consumer spending has softened due to weather & income issues.
The labor market remains stable but fragile, with the unemployment rate at 4.3 percent, a declining job-finding rate, & high long-term unemployment.
Total PCE inflation rose to 3.8 percent in April due to energy prices, while core PCE inflation reached 3.3 percent.
Bowman attributes recent inflation increases largely to higher energy prices & tariff effects resulting from the conflict in Iran.
She supports looking through temporary energy price shocks to avoid unwarranted restraint on the economy, provided credibility to return inflation to 2 percent is maintained.
The current moderately restrictive policy stance aims to stabilize the labor market while allowing inflation to trend down as supply disruptions ease.
Bowman stresses that monetary policy decisions must be transparent, consistent, & clearly communicated to maintain the Fed's credibility.