Federal Reserve Governor Michelle W. Bowman Signals Patience on Rates Amid Iran-Linked Inflation Risks

At the Central Bank of Iceland’s Reykjavík Economic Conference, Federal Reserve Governor Michelle W. Bowman said the Federal Reserve should look through temporary energy-driven inflation tied to the Iran conflict if policy remains credible and inflation expectations stay anchored. She said it is too early to fully assess the conflict’s inflation impact, but higher energy prices have lifted personal consumption expenditures inflation, with April readings at 3.8 percent for headline PCE and 3.3 percent for core PCE. Bowman said underlying inflation may be closer to 2 percent based on measures such as trimmed mean PCE after excluding temporary tariff and software-price effects. She described the U.S. economy as resilient, with moderate to solid GDP growth supported by artificial intelligence-related investment, but said the labor market remains vulnerable despite a 4.3 percent unemployment rate in April. Bowman supported retaining policy language that further rate cuts remain possible and said the current moderately restrictive stance should preserve labor-market stability while allowing inflation to resume its decline. She added that policymakers may need to revise their outlook if war-related inflation persists, oil-price pressures broaden beyond energy, or the conflict’s effects last longer than expected.