Fed governor explains dissent from 50 basis point rate cut

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Federal Reserve Governor Michelle Bowman on Friday issued a statement explaining her decision to dissent from the central bank's decision to cut interest rates by 50 basis points.

The Federal Open Market Committee (FOMC), the Fed's policymaking arm, lowered its target range for the benchmark federal funds rate from a range of 5.25% to 5.5% to 4.75% to 5%. It cited progress in lowering inflation toward the Fed's 2% target and noted a strong but softening labor market. Fed Chair Jerome Powell said «we don't think we're behind» a potential economic downturn but the move could be viewed as «a sign of our commitment to not get behind.»

Bowman explained in a statement published after the conclusion of the Fed's «blackout» period that she preferred a smaller 25 basis point cut. A cut of that size was viewed as the most likely course of action by economists polled by LSEG prior to the decision, though interest rate markets increasingly anticipated the larger 50 basis point cut prior to Wednesday.

«The U.S. economy remains strong, with solid underlying growth in economic activity and a labor market near full employment,» Bowman wrote. «Although hiring appears to have softened, layoffs remain low. I see the normalization in labor market conditions as necessary to help bring wage growth down to a pace consistent with 2 percent inflation, given trend productivity growth.»

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Bowman said she would've preferred a smaller 25 basis point cut to interest rates at the outset of the rate-cutting cycle. (Photographer: Al Drago/Bloomberg via Getty Images / Getty Images)