"Progress on lowering inflation has stalled": Fed's Bowman takes aim at Iran war

Federal Reserve (Fed) Governor Michelle Bowman said progress on lowering inflation has stalled while discussing the economic outlook and monetary policy in a speech at a conference in Iceland on Friday. Bowman claimed that the longer the Iran war continues, the greater the risks to inflation become.

Key takeaways:

Progress on lowering inflation has stalled.

The US economy has remained resilient despite signs of fragility in the labor market.

It is still too early to gauge the full impact of the Middle East war on the economy.

The longer the Middle East war continues, the greater the risks to inflation.

An extended energy shock would put upward pressure on inflation later this year.

She would consider a shift in the policy outlook if war-driven inflation pressure broadens.

The Fed can look through an energy shock if it maintains credibility on monetary policy.

Reacting to a temporary energy shock could unnecessarily weigh on the economy.

The current moderately restrictive policy stance aims to support employment while lowering inflation.

It was appropriate for the Fed to maintain an easing bias in the April 29 policy statement.

She wants more clarity on the war's impact before reassessing the outlook.

Bowman is optimistic that an end to the conflict will help ease energy prices.”