Federal Reserve Vice Chair for Supervision Michelle Bowman said Monday she would support cutting interest rates as soon as next month, arguing that the inflationary impact of President Donald Trump’s trade war has been smaller than feared and that the US labor market is showing signs of weakness.
Her comments align with those of fellow Governor Christopher Waller, who said Friday that the Fed should not delay rate cuts until labor market weakness becomes more pronounced.
Waller, another Trump appointee, downplayed the long-term inflationary risk of tariffs and suggested that monetary easing could begin as early as next month.
Waller and Bowman’s remarks signal a shift within the central bank and highlight growing internal tension over whether the Fed should move quickly to ease policy.
Bowman told a gathering in Prague that recent economic indicators have “not shown clear signs of material impacts from tariffs and other policies” and that the inflationary effects of trade measures “may take longer, be more delayed, and have a smaller effect than initially expected.”
Inflation rose 2.4% year-over-year last month, with the Consumer Price Index increasing 0.1% for the month. Core inflation also rose 0.1% monthly and 2.8% annually, driven largely by shelter and food costs.
While current inflation remains moderate and within the Fed’s target range, rising input prices tied to Trump-era tariffs have raised concerns about potential acceleration later in the year.
But Bowman believes conditions are ripe for a rate cut.
“All considered, ongoing progress on trade and tariff negotiations has led to an economic environment that is now demonstrably less risky,” she added.
“As we think about the path forward, it is time to consider adjusting the policy rate.”
Bowman, a Trump appointee who joined the Fed’s Board of Governors earlier this month, also warned of growing vulnerabilities in the labor market.
“We should put more weight on downside risks to our employment mandate going forward,” she said, noting “signs of fragility in the labor market.”
Looking ahead to the Fed’s next policy meeting, she emphasized that upcoming data would be key to guiding the decision.
“If upcoming data show inflation continuing to evolve favorably… or if we see signs that softer spending is spilling over into weaker labour market conditions, such developments should be addressed in our policy discussions and reflected in our deliberations.”
Federal Reserve Bank of Chicago President Austan Goolsbee also said Monday that a rate cut should be considered because the surge in tariffs has had a more modest impact on the economy relative to what was expected.
“Somewhat surprisingly, thus far, the impact of tariffs has not been what people feared,” Goolsbee said in public comments before the Milwaukee Business Journal mid-year outlook.
While it is still uncertain what tariffs will do to price pressures, “if we do not see inflation resulting from these tariff increases, then, in my mind, we never left what I was calling the golden path before April 2,” which could well open the door to a push toward rate cuts, Goolsbee said.
The former President Obama aide did not offer a time frame for when the Fed should cut rates.
However, not all Fed officials are on board.
Richmond Fed President Thomas Barkin pushed back on the need for immediate action, telling Reuters: “I don’t think the data gives us any rush to cut…I am very conscious that we’ve not been at our inflation target for four years.”
Barkin said firms in his district still expect prices to rise later this year as tariffs kick in and warned against ignoring the potential for a renewed inflation spike.
“Nothing is burning on either side such that it suggests there’s a rush to act,” he said.
“Spending is holding up fine. It’s not frothy. It’s not weak.”
Fed Chair Jerome Powell has also taken a more cautious stance, urging patience while the central bank assesses the full economic impact of Trump’s trade measures.
He has said that while rate cuts are possible later this year, the Fed must first see how inflation evolves in response to tariffs.
The Fed has held interest rates steady at 4.25% to 4.5% since December after cutting them by a full percentage point last year. Its most recent projections revealed a split: seven officials expect rates to remain on hold through the end of 2025, while ten foresee two or more cuts.
Trump has launched a series of personal attacks on Powell, calling him a “moron,” “numbskull” and “obvious Trump Hater” while demanding immediate and aggressive interest rate cuts.
Trump has floated firing Powell and questioned why the Fed’s Board of Governors hasn’t overruled him. He argues the Fed should slash rates now to boost the economy and raise them later if needed, a stance that sharply contrasts with the central bank’s cautious, data-driven approach.
“The Administration has consistently maintained that tariffs will ultimately be borne by foreign exporters who rely on doing business with the United States, the biggest and best consumer market economy in the world,” White House spokesperson Kush Desai told The Post.
“Despite endless fearmongering by the media, Democrats, and so-called ‘experts’, that’s what has played out: Americans have now seen four consecutive expectation-beating inflation reports.”
The Fed declined to comment.
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