Federal Reserve Vice Chair for Supervision Michelle Bowman, recently tapped by President Trump as the central bank’s top bank overseer, said Monday the time to cut interest rates may be fast approaching as she is growing more worried about risks to the job market and is less concerned tariffs will cause an inflation problem.
“It is time to consider adjusting the policy rate,” Bowman said in the text of remarks to be delivered before a gathering held in Prague, Czech Republic. Bowman said inflation appears to be on a sustained path back to 2% and she said she expects “only minimal impact” on inflation from trade policy.
“Should inflation pressures remain contained, I would support lowering the policy rate as soon as our next meeting in order to bring it closer to its neutral setting and to sustain a healthy labor market,” Bowman said.
Last week, the Federal Reserve meeting in a gathering that left its overnight target-rate range fixed between 4.25% and 4.5%. Officials remained in a wait-and-see mode amid the considerable economic uncertainty created by President Donald Trump’s erratically implemented trade policy. Fed officials are worried surging import taxes could depress growth while restarting what had been cooling inflation pressures.
Bowman said in her speech that she supported the Fed’s decision to hold steady. But the appears to see far fewer storm clouds ahead for the economy, and in her speech, she said more clarity is arriving over the outlook. Bowman’s openness to cutting rates is joined by that of Fed Governor Christopher Waller, who said in a television interview Friday he’d also consider a rate cut at the July 29-30 meeting. Waller is widely considered to be in the running to succeed Fed Chair Jerome Powell, whose term ends next year.
Trump has repeatedly pressured the Fed to pursue very large rate cuts amid insults to Powell. Observers believe any Fed chair would need to align with Trump’s desire for much lower short-term borrowing costs.
In her remarks, Bowman noted the job market is still in a good place but she’s more worried about what lies ahead for the sector, and that’s part of what’s informing her dovish monetary policy views.
“We should also recognize that downside risks to our employment mandate could soon become more salient, given recent softness in spending and signs of fragility in the labor market,” Bowman said.
The Fed official was also quite sanguine on the inflation outlook, saying “it appears that any upward pressure from higher tariffs on goods prices is being offset by other factors and that the underlying trend in core [Personal Consumption Expenditures] inflation is moving much closer to our 2% target than is currently apparent in the data.”
