Fed Governor Michelle Bowman Reaffirms Expectation for Three Rate Cuts in 2025

Federal Reserve Governor Michelle Bowman is holding firm on her projection that the U.S. central bank will cut interest rates three times before the end of 2025 despite the Fed’s decision last month to keep rates steady.

Speaking at the Kansas Bankers Association 2025 CEO and Senior Management Summit in Colorado Springs over the weekend, Bowman explained why she and fellow Governor Christopher Waller broke ranks with the rest of the Federal Open Market Committee (FOMC) in July. The pair voted for a cut at the last meeting, marking the first time in over three decades since 1993 that two Fed governors have simultaneously dissented in favor of easing policy.

Why Bowman Says It’s Time to Ease

Bowman argued that the U.S. economy is showing “signs of fragility” in the labor market and that inflation when stripped of temporary tariff-related bumps has moved much closer to the Fed’s 2% target.

“Taking action at last week’s meeting would have proactively hedged against the risk of a further erosion in labor market conditions and a further weakening in economic activity,” Bowman said.

Her comments follow a disappointing July jobs report, which showed the economy adding just 73,000 jobs, far short of the 110,000 economists had forecast. On top of that, previous figures for May and June were revised down by a combined 258,000 jobs, painting a weaker picture of employment growth than earlier believed.

Despite this, Bowman noted the labor market still appears close to full employment though she cautioned that official data has become harder to interpret due to lower survey participation rates and shifting economic dynamics, including immigration patterns and business creation trends.

A Break from Powell’s View

The Fed’s decision to hold rates in July was partly influenced by Chair Jerome Powell’s concerns that tariffs could cause more persistent inflation. Bowman, however, sees those price increases as mostly one-time adjustments rather than a lasting inflationary threat.

In her view, maintaining the current “moderately restrictive” stance for too long risks damaging the employment side of the Fed’s dual mandate full employment and stable prices.

Three Cuts Still on the Table

Bowman said she still envisions three 25-basis-point cuts spread across the remainder of 2025, a position she’s maintained since last December. That would represent a gradual move toward a more neutral policy stance, reducing the need for more dramatic rate reductions later if the economy softens further.

She also emphasized that the plan isn’t set in stone policy will shift if economic data changes course. Before the next FOMC meeting in mid-September, the Fed will have two more inflation reports and another jobs report in hand, giving policymakers a clearer view of the road ahead.

The Stakes for the Fed

The rare dual dissent from Bowman and Waller underscores a growing divide inside the Fed about when and how quickly to pivot from holding rates steady to easing. For now, the market appears to side with them: traders are pricing in a high probability of a September rate cut, especially after the recent labor market weakness.

Bowman summed up her stance by calling for a proactive approach: move toward neutral now, rather than risk “a larger policy correction” later if the economy loses momentum. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.