Michelle Bowman, a member of the Federal Reserve’s Board of Governors, indicated on Monday her openness to an interest rate reduction at the upcoming policy meeting in July, contingent on continued stability in inflation rates.
Speaking at a conference in Prague, Bowman became the latest central bank official to express the view that the tariffs imposed by President Donald Trump will likely exert only a temporary and minimal effect on inflation, thereby potentially creating room for lower interest rates.
“If inflation pressures remain subdued, I would favor a decrease in the policy rate at our next meeting to align it more closely with its neutral level while fostering a robust labor market,” she stated in her prepared remarks. “I will closely monitor the evolving economic conditions, including the Administration’s policies and changes in financial markets.”
Bowman’s viewpoint aligns with comments made by fellow Fed Governor Christopher Waller, who conveyed to Finance Newso last Friday that he, too, believes the Fed could contemplate rate cuts in July.
Trump has been vocal in advocating for rate reductions as a strategy to alleviate financing strains from the growing national debt. Nonetheless, the Federal Open Market Committee (FOMC) decided last week to maintain its target interest rate within the range of 4.25%-4.5%.
Bowman noted her support for the shift in the post-meeting policy statement, highlighting reduced policy uncertainty and a growing focus on potential vulnerabilities within the labor market.
Despite earlier concerns that Trump’s tariffs might ignite inflation, data has so far shown negligible impact. Concurrently, the President has softened his stance, indicating a willingness to engage in negotiations with key trade partners.
“It’s likely that the effects of tariffs on inflation may materialize more slowly and have a lesser impact than initially anticipated, particularly as many companies have stockpiled inventories,” Bowman commented. “Considering our path forward, it’s time to evaluate the adjustment of the policy rate.”
While Trump has suggested that the Fed should implement a minimum reduction of 2 percentage points, Bowman’s statement did not specify her preferred magnitude of the cut, and Waller mentioned that significant reductions are not necessary at this juncture.
The FOMC is scheduled to convene on July 29-30. Futures market analysts currently project only a 23% likelihood of an interest rate change at this meeting, with a 78% chance of a cut by September, based on the CME Group’s FedWatch tool.
