Fed Governor Michelle Bowman Backs July Rate Cut, Citing 'Contained' Inflation Pressure: 'Impact Of Tariffs...May Take Longer'

Federal Reserve Governor Michelle Bowman has expressed her support for a potential interest rate cut in July, provided that inflation remains subdued.

What Happened:  Bowman, during a speech in Prague, suggested that an interest rate cut at the upcoming July meeting would be appropriate if inflationary pressures remain low, reported CNBC on Monday.

“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,” Bowman said.

Bowman’s view aligns with that of fellow Governor Christopher Waller, who also hinted at a possible rate cut in July. Both governors are of the opinion that the effect of President Donald Trump‘s tariffs on prices will be temporary and muted, thus creating a favorable environment for lower rates.

"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," stated the Fed Governor.

While Bowman did not specify the extent of the rate cut she supports, Waller has stated that drastic cuts aren’t needed at the moment. The FOMC’s next meeting is scheduled for July 29-30.

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Why It Matters: The Federal Reserve’s 2% inflation target has been a subject of debate, with Rep. Ro Khanna (D-CA) questioning its sanctity. The Fed’s decision to maintain its benchmark rate at 4.25%-4.50% for a sixth consecutive meeting, has left borrowing costs and deposit payouts near current levels across the economy. This comes amid mounting White House pressure for rate cuts.

Sen. Elizabeth Warren (D-Mass.) criticized President Trump’s tariff policies, arguing they prevent the Federal Reserve from delivering the lower interest rates Americans need.

Meanwhile, Federal Reserve Chair Jerome Powell’s semiannual appearance starts Tuesday as he delivers the Federal Reserve's monetary policy report to the House Financial Services Committee, followed by the Senate Banking Committee on Wednesday.

• READ MORE: Why Powell Held Rates Steady, And What Trump’s Iran Comments Could Mean For Markets

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