Trump's "faction" Federal Reserve Board member warns: Must immediately cut interest rates significantly, or it will harm the U.S. economy
Federal Reserve Governor Michelle Bowman warned that failing to quickly and significantly cut interest rates would harm the U.S. economy. She believes the current policy interest rate of 4% to 4.25% is too high and that the pace of rate cuts needs to be accelerated to address economic downside risks. Bowman advocates for a one-time cut of 50 basis points rather than gradual adjustments, arguing that the neutral interest rate level should be reached as soon as possible
According to the Zhitong Finance APP, Federal Reserve Governor Milan stated that if the central bank does not quickly take measures to cut interest rates, it may harm the economy.
This newly appointed governor, who was appointed by President Trump, continues to hold a unique position among policymakers, advocating for immediate and significant interest rate cuts. He believes that the current policy interest rate range of 4% to 4.25% set by the Federal Reserve is extremely restrictive—because this rate level is far above his estimated "neutral rate" level.
In an interview on Thursday, Milan stated, "For this reason, policy adjustments must accelerate rather than proceed slowly. When monetary policy is in such a tight position, the economy becomes more vulnerable to downward shocks. In my view, we really do not need to take such risks."
The Federal Reserve voted last week to lower interest rates by 25 basis points, marking the first rate cut of 2025. Milan voted against this decision, preferring a one-time cut of 50 basis points.
Several policymakers, including Federal Reserve Chairman Powell, have been cautious about rate cuts, mainly concerned that Trump's tariff policies may continue to push inflation higher. Powell stated that this upward inflation risk, coupled with signs of weakness in the labor market, will pose challenges for the Federal Reserve's decision-making in the coming months.
However, Milan emphasized on Thursday that officials should reach the neutral rate level through a series of rapid and significant rate cuts, rather than making slow adjustments throughout the year.
He pointed out, "In my view, we can quickly achieve our goal through several 50 basis point cuts, recalibrating monetary policy; once we reach the neutral level, we can then adopt a more cautious adjustment pace."
