Federal Reserve Governor Michelle Bowman: The downside risks to the U.S. economy are rising, and the pace of interest rate cuts should be accelerated
Federal Reserve Governor Michelle Bowman stated that the downside risks facing the U.S. economy are increasing, and monetary policy should be adjusted accordingly. She emphasized the importance of quickly returning the federal funds rate to a neutral level and pointed out that trade uncertainty could become a key influencing factor for the economy in the future. Bowman expects PCE inflation to fall to 2% within a year and a half and believes that two more rate cuts within the year are a realistic expectation
According to the Zhitong Finance APP, Federal Reserve Governor Michelle Bowman stated on Wednesday that the "downside risks facing the U.S. economy are higher than a week ago," and monetary policy should adjust accordingly.
Bowman pointed out that this makes it particularly important to "quickly return the federal funds rate to a neutral level." He indicated that he initially thought market uncertainty had significantly diminished, but last week's friction surrounding rare earth trade has changed the situation again.
Bowman stated that current trade uncertainties have not yet directly impacted the U.S. economy but could become a key influencing factor for future economic prospects. He added that this new uncertainty does not mean the Federal Reserve needs to cut rates more aggressively than before. Last month, he noted that a reasonable target range for the federal funds rate should be about two percentage points lower than the current 4.00% to 4.25%.
Bowman emphasized that the independence of the Federal Reserve is "crucial," and the central bank must maintain a non-political image, avoiding involvement in political issues such as climate change or racial matters. He stated that the core mission of the Federal Reserve is to "maintain price stability and full employment," rather than focusing on market performances like record-high gold prices.
Regarding the issue of key economic data being missing due to the U.S. government shutdown, Bowman expressed hope to obtain the latest inflation data before the October Federal Open Market Committee (FOMC) meeting. He pointed out, "Policy-making should rely more on economic forecasts rather than just current data; however, forecasts depend on data."
According to the U.S. Bureau of Labor Statistics (BLS), the September Consumer Price Index (CPI) data will be released on October 24, 2025.
Bowman expects that the U.S. Personal Consumption Expenditures (PCE) overall inflation will fall to 2% within about a year and a half. He also noted that housing inflation is expected to slow down, mainly due to a decrease in immigration and the lagging effect of rising housing costs.
When discussing the interest rate outlook, Bowman stated that while he personally leans towards more aggressive rate cuts, considering the median forecasts of FOMC members, "two more rate cuts this year are a realistic expectation."
He concluded, "The economic outlook itself has not deteriorated, but the risks have indeed increased compared to a week ago."
