Former President Trump, who has consistently called for significant interest rate cuts and swift action from the Federal Reserve, was contradicted by an official he appointed. Michelle Bowman, a Federal Reserve Governor appointed last year as Vice Chair for Supervision, does not seem in a hurry and prefers to pause interest rate cuts, believing the Fed can afford to wait, although she still supports further cuts in the future.
On Friday, the 30th, Eastern Time, Bowman stated at an event in Hawaii that after a 75 basis point cut by the end of 2025, the Fed could act &#34;leisurely&#34; to adjust the policy rate to a neutral level at a more &#34;prudent pace.&#34;
Bowman mentioned that in the Summary of Economic Projections (SEP) she submitted last December, she anticipated three total rate cuts in 2026, but the question at this week's Fed meeting was about the timing of the cuts—whether to continue cutting rates and reach the neutral rate before the next meeting in April, or to proceed at a more cautious pace throughout the year. She ultimately chose to vote in favor of maintaining the current interest rates this week.
From the forecast of three total cuts of 75 basis points, Bowman's expected rate cuts fall far short of Trump's demands. Currently, the target range for the federal funds rate is between 3.50% and 3.75%, while Trump stated in a December interview that he believes rates should be at 1% or lower.
Also on Friday, St. Louis Fed President Alberto Musalem, who will have voting rights at the FOMC meetings in 2028, expressed a similar stance. At an event in Arkansas, he stated that lowering rates to a loose range in the context of inflation being above target and risks being roughly balanced &#34;would be unwise.&#34; He warned that rate cuts could raise inflation expectations and long-term rates, ultimately harming employment.
Bowman and Musalem's positions contrast with the two Fed governors who voted in favor of rate cuts this week. Christopher Waller stated on Friday that monetary policy is still restricting economic activity, and economic data indicates the need for further easing. Stephen Miran expressed that he still believes the Fed's policy rate is too tight, with the unemployment rate approximately 0.5 percentage points too high.
<h2>Bowman Supports Prudent Pace for Rate Cuts</h2>
In her speech on Friday, Bowman elaborated on her reasons for pausing rate cuts. She stated that given the high level of inflation and the potential distortion of economic data due to last year's record-length federal government shutdown, there is uncertainty in the economic data, making it wise to pause further cuts. She stated:
<blockquote>
&#34;After accumulating a 75 basis point cut in the second half of last year, I believe we can take action leisurely and 'preserve policy firepower' for a while to carefully assess how lower levels of policy restriction transmit to the broader financial environment and promote improvements in the labor market.&#34;
</blockquote>
Bowman acknowledged that the downside risks in the labor market have not been eliminated but emphasized that there is evidence indicating that &#34;the labor market remains fragile,&#34; while also showing some signs of stabilization. She believes that as the effects of tariffs fade, inflation will return to the Fed's 2% target
Wall Street Journal previously mentioned that Bowman was thought to possibly vote in favor of a rate cut alongside Waller and Milan at this week's meeting, as her concerns about the labor market were greater than some of her colleagues. However, the statement after Wednesday's meeting indicated that she ultimately did not &#34;defect.&#34;
From recent statements, it appears that Bowman wants more data before resuming rate cuts.
<h2>Musalem Warns of Rate Cut Risks</h2>
In a speech on Friday, Musalem explicitly opposed continuing rate cuts at the current time. He stated that the current level of interest rates is no longer significantly dragging on the economy, and ongoing price increases should prompt the Federal Reserve to avoid further rate cuts.
Musalem said:
<blockquote>
&#34;In addition to potentially leading to higher or more persistent inflation risks, loosening (monetary) policy could have adverse effects on the labor market, as it would raise inflation expectations and long-term interest rates, thereby slowing economic growth and harming employment.&#34;
</blockquote>
Nevertheless, Musalem indicated that he would support further rate cuts if there are signs of further weakness in the labor market and no evidence of persistently high inflation or rising inflation expectations. He also mentioned that he might support rate cuts if expected inflation falls to or below the target.
Musalem holds an optimistic view of the U.S. economy, expecting economic growth to reach or exceed trend levels this year. He believes the labor market is cooling in an &#34;orderly&#34; manner, with a low risk of significant deterioration. He also anticipates that the impact of tariffs will fade later this year, pushing inflation back to the 2% target.
<h2>Waller and Milan Advocate for Continued Rate Cuts</h2>
In a statement on Friday, Waller elaborated on his reasons for voting against the motion at this week's meeting. This was his first dissenting vote since disagreements emerged within the Federal Reserve's decision-making body last year.
Waller stated, &#34;Monetary policy is still restricting economic activity, and economic data clearly indicates the need for further easing.&#34; He pointed out that since mid-last year, the unemployment rate has risen, job growth has slowed, and upcoming data revisions may show that wage employment did not actually grow last year.
Waller revealed that he heard about layoff plans for 2026 during several outreach meetings, indicating considerable uncertainty regarding future job growth, and that a significant deterioration in the labor market is a major risk. He also noted that inflation is actually very close to the Federal Reserve's 2% target when excluding the impact of Trump’s tariffs.
Milan stated that he still believes the Federal Reserve's policy rate is too restrictive, and employment has not stabilized enough to eliminate concerns. He emphasized that there is currently no inflation problem in the U.S., with the unemployment rate approximately 0.5 percentage points higher than normal. Milan, who was &#34;appointed&#34; by Trump last year, has consistently voted against rate decisions since taking office in July.
At this week's meeting, the Federal Open Market Committee (FOMC) decided to maintain interest rates unchanged with a vote of 10 in favor and 2 against. Both Milan and Waller, who voted against, supported a 25 basis point rate cut. This marks the fifth consecutive meeting of the FOMC with dissenting votes. Milan has consistently voted against since taking office, previously advocating for a 50 basis point rate cut

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Bowman, a governor appointed by Trump as the Vice Chair for Financial Supervision at the Federal Reserve, believes that it is wise to pause further interest rate cuts given the high inflation and uncertainty in economic data; she stated that she expected three rate cuts this year in December, and now adjustments to interest rates should be made at a more cautious pace. St. Louis Fed President Bullard opposes continuing to cut rates at this time, warning of the risks of higher and more persistent inflation as well as risks to employment

- Federal Reserve Board member Michelle Bowman, appointed by President Trump, suggests a pause in interest rate cuts despite supporting future reductions, presenting a contrast to Trump's calls for aggressive cuts.  
- At a recent event, she stated that after cutting rates by 75 basis points by the end of 2025, the Fed can act at a careful pace, considering economic uncertainties and high inflation.  
- St. Louis Fed President Alberto Musalem echoed similar caution, emphasizing the risks of lowering rates amid existing inflation, while other members called for continued cuts based on economic data.

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