Federal Reserve Vice Chair for Supervision Michelle Bowman has indicated she would support lowering interest rates as early as July, citing contained inflation pressures and potential risks to the labour market. In recent remarks on the economy and monetary policy, Bowman stated that if inflation continues on its current trajectory towards the Fed’s 2 per cent target, a rate cut would be appropriate to bring it closer to a neutral setting and sustain a healthy labour market.
Bowman’s comments come after the Fed held its benchmark interest rate steady at its last meeting, remaining in a range of 4.25 per cent to 4.5 per cent. While she supported the decision to hold, she acknowledged the current rate is above neutral. Federal Reserve, the central bank of the United States, aims to maintain stable prices and maximum employment. Bowman noted that downside risks to employment could become more prominent, especially considering recent softness in spending and signs of fragility in the labour market.
Regarding the Trump administration’s trade policies, Bowman observed that expanded tariffs have not yet significantly impacted economic data, with both the labour market and inflation remaining stable. She suggested that the effects of tariffs on inflation might be slower to materialise and less impactful than initially anticipated, in part due to firms building up inventories. Further, ongoing progress in trade negotiations has reduced overall economic risk.
“In my view, it was appropriate to recognise that the balance of risks has shifted,” Bowman concluded, signalling a willingness to adjust monetary policy to support economic stability and address potential vulnerabilities in the labour market. Her stance suggests a potential divergence from a completely patient approach, adding weight to the possibility of a rate cut in the near future.
