When Doves Cry

More rate cut talk from the doves

Last week Fed Governor Christopher Waller, a Trump appointee from the President’s first term, started the rate cut talk the day after the Fed unanimously agreed to hold rates steady with Powell saying they had time to be patient. Waller was setting the stage for a more dovish turn from Powell’s hawkish message and sending a message to the President that he is more likely to be in line with Trump’s goals on rate cuts as he auditions for Fed Chair.

https://www.cnbc.com/2025/06/23/fed-governor-bowman-favors-july-interest-rate-cut-if-inflation-stays-low.html

Now a fellow Trump appointee, Michelle Bowman, has echoed those exact same words saying she too thinks the Fed could cut rates as early as the July meeting, just like Waller had said. The doves’ voices are crying out and collectively marshalling their forces to send the message that they are ready to move back into cutting mode.

This message from Bowman is particularly interesting given her recent past. Some may recall that she was the lone standout voice and vote against the large 50 basis point cut that the Fed started the cutting process with in September of 2024. That was the first time that the Fed had not had a unanimous vote in 20 years and her vote against it was because she thought the cut was too large and not needed.

Here is an excerpt of some of her remarks at that time:

https://bankingjournal.aba.com/2024/09/feds-bowman-explains-why-she-didnt-support-recent-rate-cut/

“Bringing the policy rate down too quickly carries the risk of unleashing that pent-up demand,” she said. “A more measured approach would also avoid unnecessarily stoking demand and potentially reigniting inflationary pressures.”

And then the big one is this:

“Finally, in dialing back our restrictive stance of policy, we also need to be mindful of what the endpoint is likely to be,” Bowman said. “My estimate of the neutral rate is much higher than it was before the pandemic. Therefore, I think we are much closer to neutral than would have been the case under pre-pandemic conditions, and I did not see the peak stance of policy as restrictive to the same extent that my colleagues may have.”

And what does she say now?

“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,”

Her view on the neutral rate seems to have shifted considerably in the past 9 months as she is now out front joining Waller in leading a charge to start lowering rates much quicker than the rest of the committee has previously been indicating, while also specifically calling out the need to get closer to neutral, an area she previously said she thought was a lot higher than the rest of the committee thought.

Her history here is one of leaning dovish during Trump’s first term, being hawkish during Biden’s term (which is when the 50 basis point cut came), and now appears to be switching back to dovish during Trump’s second term. There are legitimate arguments to be made for some of those switches as they do mirror the inflation spikes. Yet it is still interesting to note the changes and to wonder how loyalties or ideology may also be a factor.

Regardless of the reasons, the tug of war inside the committee is now clearly underway as we have more than just Waller auditioning for Fed chair on a solo crusade.

Rate cut pressure from inside the committee is increasing. I do not expect they will sway the full committee into a July cut but I do think a September cut is certainly on the table. It will be interesting to see if the July meeting results in another vote that is not unanimous.