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Federal Reserve Governor Michelle W. Bowman presented the U.S. economic outlook and financial inclusion at the Alaska Bankers Association, where she assured that while inflation has been falling, Prices remain high for the United States.
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Over the past two years, the Federal Open Market Committee (FOMC) has significantly tightened its monetary policy stance in response to high inflation. To this end, they voted in July to maintain The target range for the federal funds rate is 5.25% to 5.5%. and continue to reduce the Fed’s securities holdings.
However, despite the fall in prices, the declines were 2.5 per cent in April and 2.6 per cent in June, and are expected to remain at 2.5 per cent for the full year to July.Inflation remains uncomfortably above the Committee’s 2% objective”, Bowman said.
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“Prices remain well above pre-pandemic levels, which continues to weigh on consumer confidence. “Inflation has had the greatest impact on low-income households, as price increases for food, energy, and housing services have far outpaced overall inflation in recent years.”he elaborated.
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Although according to Bowman’s estimates, inflation will be lower under the current monetary policy stance, if the data moves towards the 2% target, The federal funds rate should be gradually reduced to prevent monetary policy from becoming unduly restrictive on economic activity and employment.
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On the other hand, the Fed governor mentioned the US economic activity, ensuring that the economy slowed down in the first half of this year. Following strong growth in 2023.
Similarly, growth in private final domestic purchases (PDFP) was solid but slower than that of gross domestic product (GDP). The slowdown in GDP growth is partly due to volatile categories such as net exportsindicating that potential economic growth is stronger than what GDP suggests.
As a result, consumer goods spending, which was “exceptionally strong last year,” softened in the first quarter of this year. This largely explains the slowdown in growth in private domestic final purchases.; Spending on goods rebounded in the second quarter, and retail sales continued to grow steadily in July.
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“Consumers appear to be reducing discretionary spending, as evidenced in part by the decline in restaurant spending since late last year. Low- and moderate-income consumers no longer have the savings to support such spending, and we are seeing a normalization in loan delinquencies, which had risen from historically low levels during the pandemic.“, he said.
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Regarding the labor market, he noted that continued easing As the number of available workers increases, while the number of available jobs decreasesthere are signs that the labor market is reaching a better balance.
“The latest labor market report showed the unemployment rate at 4.3% in July. While the unemployment rate is significantly higher than it was a year ago, it remains historically low.”
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The necessity of inclusive finance
Michelle W. Bauman and his wife An inclusive financial system allows access to financial services that improve the well-being of consumers and businesses“All consumers should be able to access the financial services and products they need,” he said.
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He added that the U.S. financial system is in a privileged position to bring consumers closer to traditional financial flows, Providing them with innovative solutions to meet the credit needs of their communities.
That’s why banks and other depository institutions help consumers and small businesses by providing “safe, fair and responsive” financial products and services. They play a fundamental role in connecting consumers to the financial system and the economy.
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“Small banks, including community banks, are essential in providing financial products and services, especially in more remote or rural areas.”, he emphasized.
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