09:38 AM EDT, 05/10/2024 (MT Newswires) -- The Federal Open Market Committee should proceed cautiously with monetary policy decisions, noting the impact of policy on financial stability, Federal Reserve Governor Michelle Bowman said Friday in prepared remarks to the Texas Bankers Association.

"When effectively implemented, monetary policy promotes price stability and maximum employment," Bowman said. "In the long run, achieving both of these objectives promotes the stability of the broader financial system. It is of utmost importance that we maintain credibility in pursuing our fight against inflation by proceeding carefully and deliberately to achieve our 2% goal."

Bowman has urged caution on policy decision before and said as recently as May 3 that she could not rule out raising the federal funds rate further as long as upside risks to inflation remain.

Bowman's remarks centered mostly on financial stability in the banking sector, citing tighter policy as one of the risks but pointing out that monetary policy and bank supervision are separate roles of the Fed.

"While monetary policy mandates may support long-term financial stability, monetary policy is an independent function that may heighten short-term stresses in the banking system," Bowman said. "Our supervisory activities should reflect an awareness of these effects on bank management decision making as we rely on regulation and supervision to promote resilience in the regulated banking system, with the goal of helping banks as they navigate an evolving macroeconomic environment and adjust to major shifts in the stance of monetary policy."