Fed's Bowman sees inflation, labor strength signaling 'work to do'

• Stubborn inflation and a stronger jobs market point to 'still work to do'
• Financial conditions have become tighter, and the Fed must consider the costs of added policy tightening
• Reducing inflation stays the main focus
• Core PCE likely increased 3.3% in October, driven by energy costs and AI-related demand
• As shocks fade, core PCE is forecast to edge nearer to 2% next year
• Economic expansion has picked up pace this year
• CPI readings suggest inflation pressures could continue
• Labor market has gotten better, is neither tight nor adding to inflation

It is amusing that many who turned dovish to position for the Fed chair nomination are now shifting back to hawkish after their party's midterm losses, largely because of worsening affordability.

Overall, she has not completed a full 360-degree turn back to her original hawkish stance, but she is trending in that direction. The text of her remarks still includes several off-ramps: labor is not fueling inflation, shocks will resolve on their own, core PCE drifts toward 2% next year, and — the key indicator — financial conditions have tightened enough that the Fed 'must weigh the costs' of additional moves.

That is the language of someone who will vote reluctantly for the next rate increase and seek an exit the next time stock markets drop sharply. Note the clear contradiction with Logan on labor: Bowman describes it as improved but not tight, while Logan calls it balanced and tightening. That represents a committee split on the output gap itself, not just on tactics. With 27.7 basis points priced in for this year, Bowman neither confirms nor challenges that figure, but she is the clearest sign yet that the hiking bloc is not unified.

It is difficult to take any of them seriously on the inflation front right now after they all chose to hold when oil was $15 higher.