"If inflationary pressures remain controlled, I support lowering interest rates as early as next month's meeting to bring rates back to neutral and maintain a strong labor market," Michelle Bowman, vice chair for supervision at the Federal Reserve (Fed), said at a conference in Prague, Czech Republic, on 23/6.

In its meeting last week, the Fed held its benchmark interest rate steady at 4.25-4.5%. The central bank has not adjusted monetary policy this year as it wants to further monitor the impact of former President Donald Trump's import tariffs.

Bowman stated that current data does not clearly indicate the effects of the tariffs and other policies. She said the impact may be smaller than anticipated.

"Tariff negotiations are reducing risks to the economic environment. Therefore, in the future, it's time to consider lowering interest rates," Bowman said. She also warned that consumer spending has recently weakened, along with signs indicating "fragility in the labor market."

Federal Reserve Vice Chair for Supervision Michelle Bowman. Photo: Reuters

Federal Reserve Vice Chair for Supervision Michelle Bowman. Photo: Reuters

At a separate event in Milwaukee on the same day, Chicago Fed President Austan Goolsbee said that once the impact of the tariffs becomes clearer, Fed officials should reduce rates. He expressed concern about the US economy potentially approaching a state of stagflation (slow growth coupled with high inflation).

Last weekend, Fed Governor Christopher Waller also predicted that import tariffs would not significantly increase inflation. Therefore, Fed officials should consider cutting rates as early as next month.

The Fed is scheduled to cut interest rates twice this year. Its next meeting will take place in July.

Since taking office, the former US president imposed a series of import tariffs on products and economies trading with the US. These tariffs have complicated the work of the US central bank.

Economists have warned that tariffs could trigger inflation and put pressure on economic growth. Accelerating inflation would force the Fed to raise interest rates. However, slowing growth tends to lead them toward rate cuts.

Trump repeatedly urged the Fed to cut interest rates over the past few months. On Truth Social on 23/6, he reiterated his call for the Fed to cut rates by "2-3 percentage points," claiming the US has "no inflation." He argued this would save the US $800 billion annually or more. Trump also continued his criticism of Fed Chair Jerome Powell, calling him a "fool, stubborn and slow."

Ha Thu (adapted from AFP)