Federal Reserve Governor Michelle Bowman says she would support a July rate cut if inflation remains under control
Federal Reserve Governor Michelle Bowman said Monday she would support an interest rate cut as soon as the next policy meeting in July, provided inflation pressures remain subdued.
Bowman is the second Fed official in recent days to indicate a rate cut could soon be on the table, following similar comments from Governor Christopher Waller, who told CNBC Friday that he also thinks the Fed could consider a cut in July.
“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,” she said in prepared remarks for a speech in Prague. “In the meantime, I will continue to carefully monitor economic conditions as the Administration’s policies, the economy, and financial markets continue to evolve.”
While President Trump has called for the Fed to lower rates by at least two percentage points to help manage the nation’s ballooning debt, Bowman did not address the size of any potential cut, and Waller said there is “no need for such dramatic cuts.”
Bowman explained that post-meeting Fed statements now reflect a diminished sense of policy uncertainty, with more attention being paid to potential labor market weakness.
“I think it is likely that the impact of tariffs on inflation may take longer, be more delayed, and have a smaller effect than initially expected, especially because many firms frontloaded their stocks of inventories,” she noted. “As we think about the path forward, it is time to consider adjusting the policy rate.”
The Federal Open Market Committee (FOMC) last week voted to keep its key interest rate in a target range of 4.25% to 4.5%.
While some economists had feared Trump’s tariffs would stoke inflation, recent measures show little to no immediate effect. The president has also softened his rhetoric, showing willingness to negotiate with major trading partners.
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“There is a tendency to romanticize the idea of interest rates coming down, but with the economy chugging along and a lot of uncertainty about what happens with inflation, there is nothing compelling the Fed to cut interest rates right now,” said Bankrate chief financial analyst Greg McBride.
“Further, we want interest rates to come down because inflation pressures are receding and the Fed can let the foot off the brake pedal, not because the economy is rolling over and in need of Fed stimulus.”
McBride added that borrowing costs remain high, with mortgage rates near 7%, many home equity lines of credit in double digits, and average credit card rates above 20%.
“But savers continue to be rewarded with inflation-beating returns on the top-yielding savings accounts, money market accounts, and certificates of deposit. Retirees, in particular, are earning good income on their hard-earned savings,” he said.
The FOMC will meet next on July 29-30. According to CME Group’s FedWatch tool, traders currently bet on just a 23% chance of a rate cut at the July meeting, with a 78% likelihood of a cut by September.
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