Fed Vice Chairwoman of Supervision Michelle Bowman warned that the Fed risks falling behind in supporting a labor market that is showing signs of weakness. She stressed that if demand conditions do not improve, interest rates need to be cut faster and more sharply to avoid more layoffs.
Bowman supported a quarter-point rate cut last week, in contrast to Governor Stephen Miran who wanted a half-point cut. She stressed that the policy statement should signal further cuts, with a median expectation of two more rate cuts by year-end.
The debate among Fed officials is heating up, with more speeches this week, including from Chairman Jerome Powell. Inflation remains above the 2% target, but most officials are now focusing on job market risks rather than price pressures.
The Fed last week added to a series of rate cuts since last year, signaling a shift in focus from inflation to the labor market. Pressure from Trump’s import tariffs is seen as temporary, making inflation concerns less dominant in the current policy discussion.
