President Donald Trump fired the head of the Bureau of Labor Statistics (BLS) after dismissing the July jobs report as “fabricated,” but Federal Reserve officials saw the data as serious evidence of an economic slowdown and justification for cutting interest rates. Fed Governor Michelle Bowman, a Trump appointee, said the latest report confirmed signs of a weak labor market and the risk that delayed policy action could hurt growth. While only Bowman and Governor Christopher Waller have supported an immediate rate cut, investors now see a more than 85% chance the Fed will cut rates at its Sept. 16-17 meeting.
BLS data on Tuesday showed the overall Consumer Price Index (CPI) rose 2.7% in July from a year ago, the same as in June, driven by lower gasoline and food prices. However, core inflation rose to 3.1% from 2.9% in the previous month, driven by higher prices for services such as medical care and aviation, as well as goods such as furniture and used vehicles that may be related to tariffs. Investors maintained their bets on rate cuts in September and December after the data was released.
Trump on Monday named E.J. Antoni of the Heritage Foundation as the new BLS Commissioner, a decision closely watched by markets given its implications for the integrity of data that influences interest rates, stock prices and politics. Fed officials have stressed that they evaluate data from a variety of sources, including government agencies, private sector data, business surveys, and administrative records such as weekly unemployment claims and quarterly payrolls. Tools like the Fed’s Beige Book and the survey of financial chiefs provide a more direct picture of the state of the economy than official data.
Minneapolis Fed President Neel Kashkari said in an interview that any attempt to manipulate data at an agency like the BLS would fail because “economic reality cannot be faked.” He said people and companies will know for themselves whether jobs are there and trying to convince them that inflation or employment numbers are better than they really are “won’t work.”
