Another Fed leader backs a July interest rate cut as inflation fears ease
Fed Governor Michelle Bowman said tariffs haven't provoked a sustained spike in prices and there's been less volatility than many economists feared
Michelle Bowman, incoming vice chair for supervision at the US Federal Reserve (Graeme Sloan/Bloomberg via Getty Images)
A top Federal Reserve official said Monday that she believes the central bank should cut interest rates next month if inflation from tariffs remains lower than expected.
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"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," Federal Reserve Governor Michelle Bowman said in prepared remarks delivered in Prague.
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Bowman, a vice chair of supervision at the Fed's Board of Governors, said the trade wars haven't provoked a sustained spike in prices and there's been less volatility than many economists initially feared.
"All considered, ongoing progress on trade and tariff negotiations has led to an economic environment that is now demonstrably less risky," she said.
She joined Christopher Wallen, another Fed governor, in backing lower interest rates next month if tariffs don't spark another round of inflation. So far, tariffs imposed by President Donald Trump have had a muted effect on consumer prices.
"I don’t think we need to wait much longer, because even if the tariffs come in later, the impacts are still the same," Waller said on CNBC last week. "It should be a one-off level effect and not cause persistent inflation.”
Others endorse the Fed sitting tight to keep a stronger lid on prices. That illustrates a split among central bank officials over how to respond to Trump's tariffs, as he escalates his attacks against the Fed. The next meeting of the 12-member Federal Open Market Committee tasked with setting interest rates will be held July 29-30.
Trump has waged a public campaign against Fed Chair Jerome Powell, arguing that the central bank should cut interest rates to help fortify the U.S. economy and finance its debt. He also mused about unseating Powell and installing himself as Fed Chair in a display of his anger at the central bank.
“I don’t know why the Board doesn’t override this Total and Complete Moron!” said Trump in a Friday social media post.
There are signs that Trump's offensive is broadening. Both Federal Housing Finance Agency Director Bill Pulte and Commerce Secretary Howard Lutnick sided with the president in attacking Powell last week.