Bowman prioritizes inflation as AI and energy pressures persist
Federal Reserve Vice Chair for Supervision Michelle W. Bowman said persistent inflation remains a priority as the labor market stabilizes. She supported holding rates in October and wants greater clarity on AI investment, energy prices and financial conditions.
Holding rates as pressures broaden
Bowman supported the October Federal Open Market Committee decision to hold the federal funds target range at 3.75–4.0 percent, allowing assessment of a recent rate increase.
She estimated October core PCE inflation at 3.3 percent, with pressures broadening.
Tariffs, energy and AI each explained roughly one-fourth of above-target September core inflation; earlier shocks explained the rest.
She forecasts inflation closer to 2 percent in 2027.
October unemployment was 4.1 percent; job gains averaged about 80,000 monthly through October.
Annual wage growth was 3.1 percent.
GDP grew 2.4 percent in the first half, potentially overstated by 0.3 percentage point; she estimated growth above 3 percent in Q3, versus 2 percent in 2025.
Energy bottlenecks and AI liabilities
The Strait of Hormuz carried about 20 percent of global oil supply before the conflict; Brent exceeded $110 a barrel in late October.
Bowman monitors energy pass-through into prices and expectations.
AI-related debt is on track to exceed $800 billion in 2026; estimated payments on other obligations exceed three times that amount.
About 25 percent of businesses and 10 percent of workers use AI daily.
She warned that disappointing AI revenues threaten valuations and credit access, while complex financing obscures counterparty risk.
The cost of further tightening
Bowman said additional tightening must be weighed against costs to interest-sensitive sectors as financial conditions tighten.
Monetary policy cannot offset direct tariff and energy effects, but can contain second-round effects.
Her policy path remains dependent on data, with no preset course.