Trump Federal Reserve Appointee Signals Support for Interest Rate Cut as Early as July

With the Federal Reserve chairman preparing to testify on Capitol Hill this week and facing blistering attacks from the president who gave him his job, the new vice chairwoman of supervision at America’s central bank says July could be a good month to cut interest rates, as the inflationary spike forewarned by some analysts due to President Trump’s new tariff rates has not emerged. 

The Fed governor who is the Trump nominee for the supervisory post, Michelle “Miki” Bowman, told a research conference at Prague on Monday that ongoing tariff and trade negotiations have led to a less risky economic environment.

While “material impacts” have not yet evolved from a tariff regime whose worst rates have been delayed, Ms. Bowman said, 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 front-loaded their stocks of inventories.” 

“At this point, we have not seen significant economic impacts from trade developments or other factors, and the U.S. economy has continued to be resilient despite some slowing in economic growth,” she said in her remarks.

Ms. Bowman added that with inflation in check and the labor market holding steady despite some softening due to layoffs edging up, modest hiring rates, and concentration of hires in only a few industries, another month of data may demonstrate that America is at par with the Fed’s dual mandate of full employment and a 2 percent inflation rate. 

“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,” she said. 

Ms. Bowman’s comments follow those by another Fed governor, Christopher Waller, who on Friday suggested that interest rates could be brought down next month.

The Fed chairman, Jerome Powell, will deliver his semiannual report to Congress on monetary policy, speaking to the House Financial Services Committee on Tuesday and the Senate Banking Committee on Wednesday. 

Last week, the Federal Open Market Committee, which is responsible for setting rates. voted to hold its key interest rate at 4.25-4.5 percent, resulting in increased debt payments by the American Treasury. Mr. Trump has repeatedly urged Mr. Powell to lower rates and has exclaimed his dismay at the decision not to do so. 

“He could do the biggest and best job for our Country by helping to lower Interest Rates and, if he reduced them to the number they should be, 1% to 2%, that ‘numbskull’ would be saving the United States of America up to $1 Trillion Dollars per year,” Mr. Trump wrote on Truth Social last week. ”I fully understand that my strong criticism of him makes it more difficult for him to do what he should be doing, lowering Rates, but I’ve tried it all different ways. I’ve been nice, I’ve been neutral, and I’ve been nasty, and nice and neutral didn’t work!”

Oddsmakers had been predicting a rate cut in September, and financial markets rallied on Monday as Ms. Bowman spoke.  

Ms. Bowman, who was a community banker before serving as the Kansas bank commissioner and then joining the Fed, was nominated by the president in March for her post as head of supervision. The Senate approved her candidacy in April and she began the role on June 9. 

Her appointment may result in an easing of tight regulatory rules on banks. In her remarks on Monday, she suggested it would be wise to turn off the autodrive on banks’ capital requirements, noting that overregulation can “create or exacerbate” risks to financial stability. 

“Regulations should not be created in a static world of ‘set it and forget it. The economy evolves over time, as do the banking and financial systems and the needs of businesses and consumers,” she said.

A senior fellow at the Mises Institute, Alex Pollock, said that by talking about deregulation and helping banks finance the Treasury, Ms. Bowman is speaking a language Mr. Trump can appreciate. 

“She’s been consistent with the role that all presidents like the Fed to have,” he tells The New York Sun. “The Fed can finance the government directly, or it can make it easier for the banks to finance the government. All of that is helping the Treasury, which is what it seems to me the speech is about.”