Federal Reserve vice-chair for financial supervision Michelle Bowman has called for a rate cut as soon as July, saying President Donald Trump’s trade war would have a smaller effect on inflation than some economists fear.
Bowman’s remarks on Monday come after Christopher Waller, another Fed governor, said on Friday that the US central bank should consider cutting interest rates as soon as next month — highlighting a divide between central bank officials over how they should respond to Trump’s tariffs.
Bowman indicated that she would support a cut as soon as next month as recent data had “not shown clear signs of material impacts from tariffs and other policies” and that the inflationary effect of the trade war “may take longer, be more delayed, and have a smaller effect than initially expected”.
“All considered, ongoing progress on trade and tariff negotiations has led to an economic environment that is now demonstrably less risky,” Bowman said. “As we think about the path forward, it is time to consider adjusting the policy rate.”
Bowman, who took up her role this month after she was nominated by Trump earlier in 2025, also pointed to “signs of fragility in the labour market” and said “we should put more weight on downside risks to our employment mandate going forward”.
“Before our next meeting in July, we will have received one additional month of employment and inflation data,” Bowman said in Prague on Monday.
“If upcoming data show inflation continuing to evolve favourably, with upward pressures remaining limited to goods prices, 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,” she said.
The Fed cut interest rates by 1 percentage point last year, but has been on pause since December, with some officials reluctant to cut amid fears that the trade war could stoke another bout of US inflation.
The Fed’s latest projections, released last week, showed that seven officials think US interest rates will need to remain on hold at 4.25 to 4.5 per cent for the duration of this year to contain stronger price pressures.
But 10 members of the rate-setting Federal Open Market Committee still think the Fed will be able to make two or more cuts this year. Those in favour of cutting have pointed to tepid inflation data, with price growth in services in particular weakening.