Powell urges caution on tariffs while some Fed officials push for immediate action on rates
US Federal Reserve governor Michelle Bowman said she would support cutting the Fed’s key interest rate “as soon as our next meeting,” if inflation pressures remain contained, according to remarks she made Monday in Prague.
Her call—echoed days earlier by fellow Governor Christopher Waller—sharpens a growing divide within the Fed as market watchers monitor the potential effects of tariffs and slowing growth.
As reported by The Globe and Mail, Bowman dismissed fears that tariffs would lead to persistent inflation, saying the impact may be “more delayed, and have a smaller effect than initially expected.”
She added that “small and one-off price increases this year should translate only into a small drag on real activity,” pointing instead to deregulation, lower business taxes, and a friendlier business environment as likely offsets to economic pressure.
Waller, speaking Friday in a CNBC interview, also backed a July cut, citing signs of labour market softening.
“We don’t want to wait until the job market tanks before we start cutting,” he said, pointing to rising unemployment among recent college graduates.
Waller was appointed by US President Donald Trump, as was Bowman in 2018.
Their stance stands in contrast to Fed Chair Jerome Powell, who, according to CNBC, told US lawmakers on Tuesday that he expects to hold rates steady until there’s clearer data on the economic impact of tariffs.
“We really think that’s the best thing we can do for the people that we serve,” Powell said, describing the Fed’s current position as “careful and cautious.”
Powell noted inflation remains above the Fed’s 2 percent target, with the preferred measure expected to reach 2.3 percent in May, up from 2.1 percent in April.
Core inflation, excluding food and energy, is projected to rise to 2.6 percent from 2.5 percent, according to the Fed’s monetary policy report.
While characterizing the broader economy as “solid,” Powell reiterated that the effects of tariff policy “remain uncertain.”
Despite Trump’s imposition of a 10 percent duty on all imports, plus additional levies of 30 percent on Chinese goods, 50 percent on steel and aluminum, and 25 percent on autos, the consumer price index rose just 0.1 percent in May, according to government data cited by The Globe and Mail.
Year-over-year, prices increased by 2.4 percent in May, up from 2.3 percent in April.
The Federal Open Market Committee voted unanimously last week to keep rates unchanged.
However, the Fed’s updated “dot plot” shows diverging expectations among its 19 rate-setting officials: nine favoured zero or one cut this year, eight anticipated two cuts, and two expected three.
The plot is anonymous, offering no clarity on which members backed which forecast.
According to CME Group’s FedWatch tool, futures pricing shows only a 23 percent chance of a rate cut at the July 29–30 meeting. A higher probability is placed on a potential cut in September.
San Francisco Fed President Mary Daly offered a third perspective Friday, telling CNBC she sees “the fall” as a more appropriate window for a rate move.
Powell also reiterated that political pressure from the White House is not influencing policy, despite increasingly personal attacks from Trump. “They’re having no effects,” Powell said. “We’re doing our jobs.”
