Fed's Bowman Signals Rate-Cut Bias, but Iran Conflict Could Alter Stance

Federal Reserve Governor Michelle Bowman said on May 29, 2026, she still leans toward cutting interest rates, but warned that a prolonged conflict in Iran could prompt a policy shift if energy-driven inflation becomes more persistent and broad-based. Speaking at a conference in Iceland, Bowman noted the Fed’s benchmark rate is “moderately restrictive” and progress on inflation has stalled. The Personal Consumption Expenditures index rose 3.8% in April, up from 3.5% in March, and core PCE edged up to 3.3%—the highest in 2.5 years. “The longer the conflict persists… the more likely I will consider shifting my approach,” she said, emphasizing that sustained higher oil prices might affect her risk assessment. She added that trimmed mean measures suggest underlying inflation is closer to 2%, concentrated in tariff-affected goods. Bowman also flagged labor market fragility beyond the 4.3% unemployment rate, citing a declining job-finding rate. She supported retaining language in the Fed’s policy statement signaling the next rate move is down, in contrast to some colleagues who wanted to keep both cuts and hikes as options.