Fed's Bowman says she's written in 3 interest rate cuts before year-end

• Bowman, typically considered hawkish, projects three rate cuts by end of 2026 to support the labor market, contrasting with the FOMC median forecast of just one cut in 2025 and one in 2027
• The Fed voted 11-1 to hold rates unchanged at 3.5%-3.75% for the second consecutive meeting after three cuts totaling 75 basis points in late 2024
• Both Bowman and Fed Chair Powell stated it's too early to assess the economic impact of the Iran war on monetary policy decisions

Summary

Federal Reserve Vice Chair for Supervision Michelle Bowman indicated she has penciled in three interest rate cuts before the end of 2026, citing concerns about labor market recovery. The hawkish FOMC member made these comments during a Friday interview on FOX Business Network's "Mornings with Maria."

Key Details

The Federal Open Market Committee (FOMC) voted 11-1 on Wednesday to maintain the federal funds rate at 3.5%-3.75%, marking the second consecutive meeting without changes. This follows three consecutive 25-basis-point cuts in September, November, and December 2024.

According to the latest Summary of Economic Projections (SEP), the median projection anticipates just one 25-basis-point cut in 2025 and another single cut in 2027. The median participant forecasts rates at 3.4% by year-end 2025 and 3.1% by end-2027, unchanged from December projections.

Market Context

Fed Chair Jerome Powell acknowledged the Committee expects "some progress on inflation," though less than hoped. He noted tariff-related inflation should decline mid-year as tariffs flow through the economy.

Both Bowman and Powell emphasized it's too early to assess the economic impact of the ongoing Iran conflict. Bowman expressed particular concern about the labor market, stating she wants to see recovery before implementing cuts. Despite economic uncertainties, she expects continued strong economic performance in 2025.

Implications

Bowman's forecast of three cuts contrasts with the more conservative median FOMC projection, suggesting potential disagreement among policymakers about the appropriate pace of monetary easing amid labor market softness and geopolitical uncertainty.