Finance

Fed Governor Bowman explains dissent on rate vote, says she’s worried about inflation

Published

3 months ago

September 24, 2024

US Federal Reserve Governor Michelle Bowman attends a “Fed Listens” event at the Federal Reserve headquarters in Washington, DC, on October 4, 2019.

Eric Baradat | AFP | Getty Images

Federal Reserve Governor Michelle Bowman said Tuesday she thought her colleagues should have taken a more measured approach to last week’s half percentage point interest rate cut as she worries that inflation could reignite.

Bowman was the lone dissenter from the Federal Open Market Committee’s decision to lower benchmark interest rates for the first time in more than four years. No governor had dissented from an interest rate decision since 2005.

In explaining her rationale, Bowman said the half percentage point, or 50 basis point, reduction posed a number of risks to the Fed’s twin goals of achieving low inflation and full employment.

The jumbo cut “could be interpreted as a premature declaration of victory on our price-stability mandate. Accomplishing our mission of returning to low and stable inflation at our 2 percent goal is necessary to foster a strong labor market and an economy that works for everyone in the longer term,” she said in remarks to a bankers group in Kentucky.

Inflation by the Fed’s preferred metric is running at 2.5%, above the central bank’s 2% goal. Excluding food and energy, core inflation is at 2.6%.

Though Bowman favored a reduction, she preferred the Fed lower by a quarter percentage point, more in line with the traditional moves at the central bank. The FOMC last cut by half a point in the early days of the Covid pandemic in March 2020, and before that the global financial crisis in 2008.

Bowman cited several specific concerns: that the big move would indicate that Fed officials see “some fragility or greater downside risks to the economy”; that markets might expect a series of large cuts; that large amounts of sideline cash could be put to work as rates fall, stoking inflation; and her general feeling that rates won’t need to come down as much as her fellow policymakers have indicated.

“In light of these considerations, I believe that, by moving at a measured pace toward a more neutral policy stance, we will be better positioned to achieve further progress in bringing inflation down to our 2 percent target, while closely watching the evolution of labor market conditions,” she said.

In recent statements, Fed officials have cited easing inflation and a softening labor market as justification for the cut. At last week’s meeting, individual policymakers indicated they expect another half percentage point in cuts this year and another full point in 2025. Market pricing, however, is more aggressive, expecting 2 full percentage points in cuts through next year.

The Fed’s benchmark overnight borrowing rate is now targeted at 4.75%-5%.

Bowman said she respects the committee’s decision and emphasized that policy isn’t on a preset course and will depend on the data, which she said has indicated the labor market has softened a bit but is still strong

“I continue to see greater risks to price stability, especially while the labor market continues to be near estimates of full employment,” she said.

Finance

Treasury delays deadline for small businesses to file new BOI form

Published

14 hours ago

December 26, 2024

Business Finance News

Janet Yellen, U.S. Treasury secretary, on a tour of the Financial Crimes Enforcement Network (FinCEN) in Vienna, Virginia, on Jan. 8, 2024.

Valerie Plesch/Bloomberg via Getty Images

The U.S. Treasury Department has delayed the deadline for millions of small businesses to Jan. 13, 2025, to file a new form, known as a Beneficial Ownership Information report.

The Treasury had initially required many businesses to file the report to the agency’s Financial Crimes Enforcement Network, known as FinCEN, by Jan. 1. Noncompliance carries potential fines that could exceed $10,000.

This delay comes as a result of legal challenges to the new reporting requirement under the Corporate Transparency Act.

The rule applies to about 32.6 million businesses, including certain corporations, limited liability companies and others, according to federal estimates.

Businesses and owners that didn’t comply would potentially face civil penalties of up to $591 a day, adjusted for inflation, according to FinCEN. They could also face up to $10,000 in criminal fines and up to two years in prison.

However, many small businesses are exempt. For example, those with over $5 million in gross sales and more than 20 full-time employees may not need to file a report.

Why Treasury delayed the BOI reporting requirement

The Treasury delayed the compliance deadline following a recent court ruling.

A federal court in Texas on Dec. 3 had issued a nationwide preliminary injunction that temporarily blocked FinCEN from enforcing the rule. However, the 5th U.S. Circuit Court of Appeals reversed that injunction on Monday.

CNBC Small Business Survey finds confidence rising among small businesses

“Because the Department of the Treasury recognizes that reporting companies may need additional time to comply given the period when the preliminary injunction had been in effect, we have extended the reporting deadline,” according to the FinCEN website.

FinCEN didn’t return a request from CNBC for comment about the number of businesses that have filed a BOI report to date.

Some data, however, suggests few have done so.

The federal government had received about 9.5 million filings as of Dec. 1, according to statistics that FinCEN provided to the office of Rep. French Hill, R-Ark. That figure is about 30% of the estimated total.

Hill has called for the repeal of the Corporate Transparency Act, passed in 2021, which created the BOI requirement. Hill’s office provided the data to CNBC.

“Most non-exempt reporting companies have not filed their initial reports, presumably because they are unaware of the requirement,” Daniel Stipano, a partner at law firm Davis Polk & Wardwell, wrote in an e-mail.

There’s a potential silver lining for businesses: It’s “unlikely” FinCEN would impose financial penalties “except in cases of bad faith or intentional violations,” Stipano said.

“In its public statements, FinCEN has made clear that its primary goal at this point is to educate the public about the requirement, as opposed to taking enforcement actions against noncompliant companies,” he said.

Certain businesses are exempt from BOI filing

The BOI filing isn’t an annual requirement. Businesses only need to resubmit the form to update or correct information.

Many exempt businesses — such as large companies, banks, credit unions, tax-exempt entities and public utilities — already furnish similar data.

Businesses have different compliance deadlines depending on when they were formed.

For example, those created or registered before 2024 have until Jan. 13, 2025, to file their initial BOI reports, according to FinCEN. Those that do so on or after Jan. 1, 2025, have 30 days to file a report.

There will likely be additional court rulings that could impact reporting, Stipano said.

For one, litigation is ongoing in the 5th Circuit, which hasn’t formally ruled on the constitutionality of the Corporate Transparency Act.

“Judicial actions challenging the law have been brought in multiple jurisdictions, and these actions may eventually reach the Supreme Court,” he wrote. “As of now, it is unclear whether the incoming Trump administration will continue to support the Government’s position in these cases.”