Even Federal Reserve Board member Michelle Bowman recently expressed support for interest rate cuts. She’s right to point to the strengthening data that’s coming out of the U.S. job market. During a speech at a bankers’ conference in Colorado on Saturday, Bowman stated that this month’s employment report has bolstered her conviction that lower interest rates are necessary to foster economic growth.
Bowman was one of only two Federal Reserve officials who voted in favor of cutting interest rates in the recent monetary policy meeting. She pointed to the most recent labor market data as lending her credibility to that assertion. She advocates three rate cuts from the Fed in 2019. Her appointment reflects a growing progressive concern over the administration’s economic focus. She makes the compelling case that now is the time for more accommodative monetary policy.
Bowman’s robust approach faced a stiff challenge inside the Federal Reserve. Nine other FOMC officials supported the decision to maintain the status quo on interest rates without changes. This sharp divergence speaks to the confused state among policymakers as they debate the right level of response to such improving economic indicators. Although Bowman continues to push for more reductions, her colleagues are understandably more hesitant, deciding to hold rates firm for the time being.
Bowman expressed increasing confidence that President Trump’s tariffs “will not present a persistent shock to inflation.” This longer-term view will be particularly important as fears of inflation ongoingly drive much Fed policy debate and discussion. She pointed out that inflation has been moving toward the Federal Reserve’s stated target of 2%. This could indicate a return to normalcy in the economic environment.
This discussion about rising interest rates is especially timely, given the massive economic (and potential fiscal) upheaval related to COVID-19. In particular, Bowman has expressed firm support for aggressive cuts, predicated on her determination of the strength of the labor market. She thinks that reducing the price of borrowing would create a foundation for more widespread economic growth.
