Fed’s Bowman ‘Struggles’ to See CBDC Use Case

While the Federal Reserve seeks public comment on the benefits and risks of creating a central bank digital currency, Fed Governor Michelle Bowman said today that she “intends to keep an open mind” about a CBDC but that the use case for it is not readily apparent to her.

“I struggle to find a business case for it as well,” Bowman said during a Q&A with ABA President and CEO Rob Nichols in which he raised questions about the merits of a CBDC during a conversation at the ABA Conference for Community Bankers in Palm Desert, California. “We already have a safe, sound, stable and broadly available financial services industry in the United States,” Bowman added. “My big concern would be that a CBDC could disintermediate an already functioning, an already very safe and secure and evolving” financial system.

She reiterated what the Fed said in its paper: that Congress would need to expressly authorize the Fed to offer a future CBDC. “The Federal Reserve does not have ability to offer individual accounts to the public.”

Leading her remarks with monetary policy, Bowman called for “forceful action” to rein in price inflation, which she called “much too high.” Bowman said that she “would not be surprised to see several opportunities to increase that rate over the coming meetings” of the Federal Open Market Committee, starting with the next FOMC meeting in March. Raising rates will complement the scheduled end of Fed asset purchases next month, which will “remove another source of unneeded stimulus,” she added.

“In the near term, I expect that uncomfortably high inflation will persist at least through the first half of 2022,” Bowman said. “We may see signs of inflation easing in the second half of the year, but there is a substantial risk that high inflation could persist.”