We Have Trump Fed Governor Appointee Michelle Bowman as the First Governor Vote Against an FOMC Decision since... 2005

Well, Well, Well: distinctly odd. Those holding small-scale community-banker seats on the Board of Governors are rarely the interest-rate hawk fringe outliers on the FOMC. The lived experience of...

Well, Well, Well: distinctly odd. Those holding small-scale community-banker seats on the Board of Governors are rarely the interest-rate hawk fringe outliers on the FOMC. The lived experience of serving as a community banker means that repayment risk drives their institution’s typical portfolio to suffer substantially in recession. And I certainly did not see her as the inflation-hawk fringe of the FOMC… before November 2020…

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I confess to substantial curiosity about whether Fed Governor Michelle Bowman will stay hawkish on monetary policy should Donald Trump become president again on January 21, 2025…

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Trump-appointed Federal Reserve Governor Michelle Bowman dissented from the Federal Reserve’s decision at its September 18, 2024 meeting to cut the Federal Fund interest rate by 0.50%-points. She is the very first Fed Governor to vote against an FOMC decision since... 2005.

Before she was appointed a Fed Governor, she was, starting at age 24: a staffer for Senator Bob Dole of Kansas over 1995-1996, counsel to the U.S. House Committee on Transportation and Infrastructure and the Committee on Government Reform and Oversight over 1997-2002, director of congressional and intergovernmental affairs at the infamous Bush Federal Emergency Management Agency (FEMA) in 2002, a deputy assistant secretary and policy advisor to Homeland Security Secretary Tom Ridge over 2003-2004, leading a London-based government and public affairs consultancy over 2004-2010, vice president of Farmers & Drovers Bank (25 employees, assets of $185 million) in Council Grove, Kansas (population 2,140) over 2010-2017, and then, last, State Bank Commissioner of Kansas over 2017-2018.

Back before 2001 she did not strike me as a monetary-policy hawk. Higher real interest rates choke off bank business, and reduce the value of their longer-duration assets relative to their short-duration liabilities.

Since 1993 there have been only six dissents from the Chair’s position by the six other Fed Governors, compared to 71 from the rotating five voting Fed Bank Presidents. The convention is strongly that Governors vote with the Chair to avoid the potential hit to the Fed’s legitimacy from the possibility that a Bank President who is legally a private banker casts a vote that determines what has become core government policy. Moreover, there has been only one hawkish Governor dissent—until now. The convention is that Governors dissent only in extremis, when they think the center of gravity of the committee is not taking risks to employment seriously enough.

But right now the guy who appointed her, Donald Trump, is for higher interest rates to keep employment from being too high to serve his purposes:

Right now, you have to keep rates where they are until you bring the economy and it could drop. Inflation is a country buster. It’s interesting. You study inflation more than I do but I’ve studied inflation plenty. And you look back to old Germany, you look back to so many countries, it eventually breaks a country. And so you know, you can’t. They have a dream that they want to lower interest rates but they are very tough right now. Now, I would have a plan to lower costs. It doesn’t have to be interest rates. Costs. Because if you could lower costs, you could then lower interest rates. But interest rates are very high now and it’s hard for them. I know they want to try and do it. Maybe they will do it prior to the election, prior to November 5, even though it’s something that they know they shouldn’t be doing… <https://www.bloomberg.com/features/2024-trump-interview-transcript/>

And yet if he manages to return to office:

Interest rates are going to fall. Interest rates will naturally follow…. We’re going to get the energy [price] down. We’re going to get the food prices down. We’re going to do a lot of cutting [of interest rates] also, and we’re going to make our country very livable… <https://www.rev.com/blog/transcripts/trump-speaks-at-phoenix-rally>

Let’s see what those intellectual property thieves at <http://perplexity.ai> have to say about this:

Please search the speeches of Fed governor Michelle Bowman. During the Trump administration, was she dovish—for lower interest rates—or hawkish—for higher interest rates? During the Biden administration, has she been dovish—for lower interest rates—or hawkish—for higher interest rates?

Based on the search results and my analysis of Michelle Bowman's statements and voting record, here is an overview of her monetary policy stance during the Trump and Biden administrations:

Trump Administration (2018-2020)

During the Trump administration, Michelle Bowman generally aligned with the Federal Reserve's overall dovish stance, supporting lower interest rates:

• Bowman took office as a Fed governor in November 2018, near the end of Trump's term.

• She consistently voted in favor of the Fed's interest rate cuts in 2019 and the emergency rate cuts in early 2020 in response to the COVID-19 pandemic.

• There is no evidence in the search results of Bowman dissenting or pushing for higher rates during this period.

Biden Administration (2021-present)

Under the Biden administration, Bowman has taken a more hawkish stance, generally favoring higher interest rates to combat inflation:

• In August 2023, Bowman expressed concerns that the fight against inflation was not yet fully resolved, suggesting a preference for maintaining higher rates.

• In August 2024, she stated that while inflation had made progress, it remained "uncomfortably above the Committee's 2 percent goal." She advocated for patience in lowering rates, warning against overreacting to single data points.

• Most notably, in September 2024, Bowman became the first Fed governor since 2005 to dissent against an interest rate decision. She voted against a 50 basis point rate cut, preferring a smaller 25 basis point reduction.

• Bowman has consistently emphasized the risks of premature rate cuts, stating that the Fed needs to be cautious in considering adjustments to the current policy stance.

In summary, Bowman appears to have shifted from a generally dovish stance during the Trump administration to a more hawkish position under Biden, particularly as inflation became a significant concern. Her recent dissent in favor of a smaller rate cut underscores her current hawkish leanings.

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References:

• Malmendier, Ulrike, Stefan Nagel, & Zhen Yan. 2021. '“The Making of Hawks & Doves: Inflation Experiences on the FOMC”. Journal of Monetary Economics. Vol. 117(C), pp. 19-42. <https://doi.org/10.1016/j.jmoneco.2020.04.002>.

• Perplexity. 2024. “Please search the speeches of Fed governor Michelle Bowman…”. September 18. <https://www.perplexity.ai/search/please-search-the-speeches-of-tX6ZnwO4QJyWN9dEhmz4TA>.

• Trump, Donald. 2024. ‘Trump Speaks at Phoenix Rally’. Rev.com. June 10. <https://www.rev.com/blog/transcripts/trump-speaks-at-phoenix-rally>.

• Trump, Donald. 2024. “Interview with Donald Trump”. Bloomberg. Accessed July 16. <https://www.bloomberg.com/features/2024-trump-interview-transcript/>.