Second Fed official signals support for faster rate cuts in latest sign of division at US central bank
The comments by Federal Reserve's vice chair for supervision Michelle Bowman is the latest sign of division among Fed policymakers about interest rates. PHOTO: REUTERS
Second Fed official signals support for faster rate cuts in latest sign of division at US central bank
NEW YORK - A second Federal Reserve official has indicated that the central bank should begin cutting rates as soon as July – the latest sign of division among policymakers about how to respond to the uncertainty caused by US President Donald Trump's shifting economic policies.
Michelle Bowman, the Fed's vice chair for supervision, said on June 23 that with inflation cooling and the labour market showing signs of weakness, 'it is time to consider adjusting' interest rates to avoid putting too much downward pressure on economic growth.
'Should inflation pressures remain contained,' Ms Bowman said in a speech in Prague, '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.'
Ms Bowman's remarks followed similar comments from Christopher Waller, a Fed governor, who said on June 20 in an interview with CNBC that policymakers should not wait for the labor market to weaken before lowering borrowing costs.
The two officials' comments appear to put them at odds with Jerome Powell, the Fed chair, who last week stressed that the central bank could remain patient as it waited to see the impact of Mr Trump's tariffs and other economic policies. Those policies are widely expected to push up prices in the months ahead.
Tariffs pose a challenge for central banks because they tend to lead to higher prices – which ordinarily lead policymakers to raise interest rates – but also to slower growth, which normally calls for lower rates. Mr Powell hinted that he was more focused on the risk of inflation right now, partly because the labour market has so far remained solid.
Mr Powell's caution has angered Mr Trump, who has railed against the Fed chair on social media and demanded that he move more quickly to lower rates. Ms Bowman and Mr Waller were appointed to their positions by Trump, and Mr Waller, in particular, is often spoken about as a potential candidate to succeed Mr Powell when his term as chair ends next year.
Ms Bowman and Mr Waller joined Powell and other officials in voting to hold interest rates steady at last week's Fed meeting. But in their recent comments, they said they did not expect tariffs to have a significant impact on inflation.
But, Ms Bowman said, she is concerned that cracks are beginning to show in the labour market. NYTIMES
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