From working her way up from community banking in rural Kansas to becoming the first person to fill the community bank seat on the Federal Reserve Board of Governors, Michelle “Miki” Bowman’s trailblazing story in the financial sector is one of fierce independence. Her inspiring story, however, does not stop there — Bowman’s latest trendsetting feat may be her most important one yet:
On September 18, 2024, Bowman became the first Fed governor to vote against an interest-rate decision by the central bank since 2005, denying Fed Chair Jerome Powell his desired consensus at a moment when the country sorely needed it.
Why would Bowman take such a stand? Well, given that the Fed found itself nearing the end of the most aggressive inflation fighting campaign since the 1980s, consensus was reached on a rate cut being quite favorable — what was not mutually agreed upon however was the size of the potential rate cut, with Bowman as mentioned previously dissenting from the rest of the board, piercing its unity: unity of which was most championed in recent years. Specifically, Bowman desired a cut of just .25 opposed to the rest of the board’s .5.
Bowman firmly believed a rate cut of .5 would mark a premature declaration of victory against inflation; whereas a smaller rate cut, half that of .5, would induce a more conservative approach on the end of the inflation fighting campaign — one that would accurately measure the state of inflation and adjust rates accordingly. “The job market and the economy remain strong… core personal consumption expenditures prices are still rising faster than 2.5% from 12 months earlier.” Bowman said in a statement released Friday afternoon.
Now, with his sizable rate cut of .5, Jerome Powell did not intend for a declaration of victory over inflation. Rather, he believed after considering all factors a larger cut of .5 would be most desirable, with inflation yet to be tamed. “We know that it is time to recalibrate our [interest rate] policy to something that’s more appropriate given the progress on inflation,” Powell said in a news briefing. “We’re not saying, ‘mission accomplished’ … but I have to say, though, we’re encouraged by the progress that we have made.”
Both Powell and Bowman agreed on the nearing of the end of inflation and action needing to be taken; what they disagreed upon however was instead how near the end of inflation was. Therefore, Bowman, with the notion that inflation was farther from over than Powell’s judgment, voted for a rate cut of .25 opposed to .5.
Very insightful. Thanks.
Indeed.