michelle w bowman : brief remarks on the economy and monetary policy brief remarks by ms michelle w bowman, member of the board of governors of the federal reserve system, at the massachusetts bankers association annual convention, key biscayne, florida, 3 may 2024. * * * i would like to thank the massachusetts bankers association for the invitation to meet with you today. 1 one of the most enjoyable and informative aspects of my role is the time i spend with bankers, listening to issues that are important to you and that affect you and your customers. banks play a key role in supporting economic growth and lending to serve their customers and communities, which is an indispensable role in the u. s. economy. conversations such as ours today help inform my work at the federal reserve board - for my understanding of both the broader u. s. economy and the banking regulatory and supervisory environment. before our conversation, i would like to briefly touch on the economy and monetary policy. over the past two years, the federal open market committee ( fomc ) has significantly tightened the stance of monetary policy to address high inflation. at our meeting earlier this week, the fomc voted to continue to hold the federal funds rate target range at 5 - 1 / 4 to 5 - 1 / 2 percent and to continue to reduce the federal reserve's securities holdings. after seeing considerable progress on slowing inflation last year, we have not seen further progress over the first quarter of this year. the 12 - month measures of total and core personal consumption expenditures ( pce ) inflation have moved roughly sideways since december and remained elevated at 2. 7 percent and 2. 8 percent, respectively, in march. with annualized 3 - month core pce inflation jumping to 4. 4 percent in march, well above average inflation in the second half of last year, i expect inflation to remain elevated for some time. the recent pickup seems to be evident across many goods and services categories, suggesting that inflation was temporarily lower in the latter half of last year. prices continue to be much higher than before the pandemic, which is weighing on consumer sentiment. inflation has hit lower - income households hardest since food, energy, and housing services price increases far outpaced overall inflation throughout this episode. economic activity increased at a strong pace last year and has maintained momentum over the first three months of this year. although first - quarter growth in gross domestic product was temporarily dampened by volatile categories, such as inventories and

two observations about the international regulatory reform agenda of the last few years, along with some implications of those observations for desirable institutional changes. the first observation is that, although there are exceptions, the output of this agenda has largely consisted of what are essentially regulatory rules, intended to be applied to firms through national law. second, most of these rules are being generated, or at least reviewed, within an overlapping set of organizations and arrangements – the basel committee, iosco, the fsb, the g - 20, and a veritable potpourri of committees functioning under the umbrella of the bank for international settlements ( bis ). these rather mundane observations lead, i think, to some rather important institutional implications. it goes without saying that the benefits of international regulatory rules will be realized only if they are implemented rigorously and consistently across jurisdictions. not only must they be incorporated into national legislation or regulations effectively, they must also be rigorously enforced by national supervisors. we do not need formal dispute mechanisms similar to those in the world trade organization, which could undermine supervisory cooperation, but we do need effective, collaborative monitoring mechanisms administered by the supervisors themselves and reported to the public. so, for example, the federal reserve has suggested that the basel committee go beyond the important function of reviewing legal implementation and also monitor how capital standards are applied within banks. while a variety of methods could be used, we are particularly interested in establishing international validation teams to verify methodologies used at individual banks on such matters as the risk - weighting of trading assets. even as the basel committee should monitor compliance with the standards it establishes, it must not lose sight of the importance of supervisory cooperation in pursuit of the shared goal of a stable international financial system. the focus on rules and standards over the last few years has been both understandable and necessary, but the basel committee should not be purely a negotiating forum. the activities of the basel committee in the 1970s and early 1980s were largely informal, involving the sharing of supervisory perspectives and, perhaps more importantly, the establishment of relationships that could be drawn upon when crossborder supervisory problems arose. i regret that these functions have been substantially attenuated over the years. with the increased membership and expanded scope of activities, a return to early practice is not feasible. but other ways must be found to foster the common goals of committee members in promoting safe and sound financial systems. the overlapping, sometimes competing, activities of all the international committees and arrangements is, like the recent emphasis on rules,