• Fed can look through energy shock if it stays credible on monetary policy
• Still early to gauge Middle East war’s impact on the economy
• Reacting to temporary energy shock could weigh down economy
• I’m optimistic the end of the war will bring easing energy prices
• Current “moderately restrictive” policy is aimed at aiding jobs and lowering inflation
• Extended energy shock would pressure inflation later this year
• The longer the war goes on, the greater the risks to inflation
• I want more clarity on war’s impact on the economy
• The US economy has remained resilient amid job market fragility
• It was good for the Fed to keep the easing bias in April
• Progress on lower inflation has stalled

Federal Reserve Governor Michelle Bowman said the US central bank can afford to look through a temporary energy-price shock stemming from the conflict in the Middle East, provided policymakers maintain credibility in their commitment to controlling inflation.

Bowman cautioned that it remains too early to determine the full impact on growth, employment, and consumer prices. While acknowledging the risks posed by higher energy costs, she suggested that an immediate monetary policy response to a short-lived shock could unnecessarily weaken economic activity.

Oil and energy prices have become increasingly volatile as markets assess the duration of the conflict. Bowman expressed optimism that a resolution to the war could eventually ease pressure on global energy markets and help stabilize prices.

At the same time, she warned that a prolonged conflict presents a more serious challenge. An extended period of elevated energy costs could begin feeding into broader inflation measures later this year, complicating the Fed’s efforts to return inflation to its 2% target.

For now, Bowman emphasized that she wants additional clarity before drawing conclusions about the conflict’s economic effects. The uncertainty surrounding both the duration of the war and its impact on commodity markets has reinforced the case for a cautious approach to monetary policy.

Bowman noted that economic activity has remained resilient despite signs of fragility in the labor market. Consumer spending and overall growth have continued to outperform expectations, even as hiring has moderated and businesses show increasing caution.

Regarding monetary policy, Bowman described the current stance as “moderately restrictive,” arguing that interest rates remain positioned to support the Fed’s dual mandate of promoting maximum employment while bringing inflation under control.

She also defended the FOMC’s decision in April to maintain an easing bias, suggesting it was appropriate to preserve flexibility as policymakers evaluate incoming data. This suggests she’s still in the dovish camp.

Nevertheless, Bowman acknowledged that progress in reducing inflation has slowed in recent months. The combination of stalled progress on inflation, uncertainty surrounding the Middle East conflict, and signs of labor-market softness leaves the Federal Reserve navigating a complex policy environment. For Bowman, the priority remains gathering additional evidence before adjusting the central bank’s course.