Federal Reserve Governor Michelle Bowman: The ADP employment report is unexpectedly reassuring, expects to continue cutting interest rates, warns that tariff decisions may weigh on the economy

On Wednesday, Milan, a newly appointed Federal Reserve governor by President Trump, stated that he believes it is still a "reasonable action" for the Federal Reserve to continue cutting interest rates, including at the last meeting of the year (December 9-10).

In a media interview, Milan mentioned that the Federal Reserve's previous policy forecast had anticipated three rate cuts in 2025. "The next natural question is: is there any change now?"

Although the lack of official economic data due to the U.S. government shutdown has been a concern, Milan still indicated that current inflation is below expectations and the labor market remains stable.

Last week, the Federal Reserve voted to cut rates by 25 basis points, lowering the target range for the federal funds rate to 3.75%-4%. Milan voted against this decision, having also opposed it in the September meeting because he preferred a one-time cut of 50 basis points.

He recently stated that his goal is to adjust the policy rate to a "neutral level," which neither stimulates nor suppresses economic growth. His core disagreement with other Federal Reserve officials lies in the fact that: "I just want to get there faster than others; the destination is actually no different."

However, since last week's policy meeting, an increasing number of Federal Reserve officials have expressed concerns about inflation and have been cautious about another rate cut in December, which makes Milan seem somewhat "out of place" in his push for further rate cuts:

Chicago Fed President Austan Goolsbee stated in a media interview that he has not yet decided whether to cut rates in December. Federal Reserve Governor Cook and San Francisco Fed President Mary Daly expressed similar views in speeches on Monday. Kansas City Fed President Jeff Schmid indicated that he opposed the rate cut in last week's meeting.

Milan stated, "Anything could happen between now and December. There could be new information, unexpected situations, or shocks that would change expectations. But unless there is new information that significantly alters the forecast, I believe continuing along the path already taken remains a consistent and reasonable choice."

A private sector employment data released on Wednesday did not change Milan's view on the labor market. Payroll processing company ADP reported that employment growth rebounded in October, adding 42,000 jobs, while September had seen a decrease of 29,000 jobs.

Milan referred to the ADP data as "a comforting surprise," but pointed out that in light of the overall employment situation, he believes the trend before the government shutdown is still continuing: moderate job growth, slowing wage growth, and labor demand may not be as strong as before. All of these indicate that interest rates could be lower than their current levels.

Milan also commented on the potential impact of the U.S. Supreme Court's tariff ruling. He warned that if the Supreme Court rules that the tariffs imposed by the Trump administration under economic emergency powers are illegal, it could increase uncertainty and weigh on the economy. "Any factors that increase tariffs or uncertainty in the trade environment could become a burden on the economy."

The justices of the U.S. Supreme Court expressed skepticism on Wednesday during nearly three hours of debate regarding the legality of President Trump's broad tariffs imposed on multiple countries under the International Emergency Economic Powers Act. As of September 30, the U.S. government had collected nearly $200 billion in revenue from these tariffs Milan pointed out that tariff revenue essentially corresponds to an increase in savings in the economy, and if national savings increase, interest rates typically decline. "If tariff revenue disappears, then interest rates will naturally be affected, which is important for monetary policy."