Federal Reserve Governor Michelle Bowman voiced her support for a possible interest rate cut at the Fed’s upcoming July policy meeting, provided inflation remains subdued. Speaking in Prague, Bowman underscored the importance of sustaining a strong labor market and adjusting rates toward a more neutral level as the primary reasons for considering a reduction. She stressed the need to closely watch changing economic conditions, including shifts in domestic policies and movements within financial markets.
Fed Officials Signal Unity on Potential Rate Cut Amid Easing Inflation Concerns
Bowman’s stance echoes that of fellow Fed Governor Christopher Waller, who also indicated support for a July rate cut. Both officials appear to be downplaying the inflationary risks tied to President Trump’s tariffs, suggesting that their impact has been mild and possibly overstated. This alignment within the Fed indicates a growing consensus that there may be room to ease monetary policy if inflation does not accelerate significantly.
Fed’s Bowman Backs July Rate Cut If Inflation Holds, Echoing Growing Policy ShiftPresident Trump has been openly pushing for lower interest rates to ease the burden of national debt servicing. Despite this, the Federal Open Market Committee (FOMC) opted to keep the federal funds rate steady at its most recent meeting, citing a target range of 4.25%-4.5%. Bowman supported the Fed’s revised post-meeting tone, which emphasized reduced policy uncertainty and a shift in focus toward potential softness in the labor market.
Muted Tariff Impact Leaves Fed Room to Cut Rates, Markets Still Uncertain
Concerns that Trump’s tariffs would cause a spike in consumer prices have largely not materialized, as inflation metrics remain subdued. Bowman attributed this to businesses stockpiling inventories in advance, which may have cushioned the inflationary effects. She stated that the delayed and reduced impact of tariffs provides more room for the Fed to consider adjusting interest rates downward without igniting inflation.
Despite Bowman’s comments, markets remain skeptical about a July rate cut, with traders assigning only a 23% chance of such a move, according to the CME FedWatch tool. A more likely scenario, based on futures market pricing, is a cut in September. Bowman did not specify how much of a rate cut she would endorse, in contrast to President Trump’s call for a drastic 2-point reduction, which Waller also dismissed as unnecessary. The FOMC’s next decision is scheduled for July 29-30.
