A recent US employment report confirmed “signs of fragility” in the labor market, a senior central bank official said on Saturday, backing three interest rate cuts this year to guard against further weakening.
In prepared remarks to a summit in Colorado, US Federal Reserve Vice Chair for Supervision Michelle Bowman called for a “proactive approach” in lowering the benchmark lending rate.
Doing so “would help avoid a further unnecessary erosion in labor market conditions” and reduce the chance that the Fed’s rate-setting committee would need to make a larger cut if the jobs market worsens further, she said.
Photo: AP
Bowman also made the case that price increases from US President Donald Trump’s sweeping tariffs this year would likely represent “a one-time effect.”
She expects inflation to return to the Fed’s two-percent target after the tariff effects dissipate.
“It is appropriate to look through temporarily elevated inflation readings and therefore remove some policy restraint to avoid weakening in the labor market,” she added.
Bowman was one of two Fed governors to dissent at the central bank’s policy meeting last month, a rare occurrence even as officials voted to hold rates steady for a fifth straight gathering.
Her latest remarks underscore growing divisions among Fed policymakers about when the independent central bank should begin slashing rates again.
The Fed has come under intense pressure from Trump recently, as the president repeatedly lambasted Fed Chair Jerome Powell for decisions to keep rates unchanged.
Bowman, who was nominated by Trump in 2018 to the Fed’s board, also took aim at government data over its declining survey response rates and other issues, saying the monthly numbers have become increasingly tough to interpret.
Even as she pointed to weakness in the labor market, she said that she remained “cautious about taking too much signal from data releases.”
On the day that the US Department of Labor released last month’s jobs report, which showed cracks in the market with employment in May and June revised down significantly by 258,000 jobs, Trump ordered the firing of the commissioner of labor statistics.
Without providing evidence, he accused Commissioner Erika McEntarfer of manipulating data for political reasons.
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