Fed’s Bowman Sees Room for Three Rate Cuts in 2025
he Labor Department report also included downward revisions to prior months, showing job growth slowed sharply in the past three months.
Quick overview
- The unemployment rate rose to 4.2%, prompting concerns about the fragility of the labor market.
- Federal Reserve Vice Chair Michelle Bowman forecasts three interest rate cuts this year due to weak employment data.
- Job growth has slowed significantly, averaging only 35,000 per month over the past three months.
- Bowman criticized the Fed's decision to maintain current interest rates, suggesting proactive cuts could have mitigated labor market deterioration.
Last Friday’s monthly jobs report from the Labor Department showed the unemployment rate rising to 4.2%, “close to rounding up to 4.3%,” as described by Federal Reserve Vice Chair for Supervision Michelle Bowman.
Bowman said the recent weak employment data underscores her concerns about the fragility of the labor market and reinforces her forecast that three interest rate cuts will likely be appropriate this year.
She was one of two Fed governors who dissented last month when the U.S. central bank voted to keep short-term interest rates in the 4.25%–4.50% range, where they’ve been since December.
While most Fed officials have been cautious about lowering rates due to the risk that tariffs from President Donald Trump’s administration could disrupt progress toward the 2% inflation target, recent comments from policymakers suggest growing openness to cuts.
“Taking action at last week’s meeting would have proactively addressed the risk of further deterioration in labor market conditions and a deeper slowdown in economic activity,” Bowman told the Kansas Bankers Association on Saturday.
Interest Rate Outlook and Projections
The Labor Department report also included downward revisions to prior months, showing job growth slowed sharply in the past three months to an average of 35,000 per month — far below the pace earlier this year. Bowman said the decline likely reflects “a significant weakening in labor demand.”
“My Summary of Economic Projections includes three cuts this year — a view I’ve held since December — and the latest labor market data reinforce that outlook,” she added.
The Fed has three remaining policy meetings this year, in September, October, and December. Economists typically see monthly job gains of around 100,000 as consistent with a steady labor market, though that threshold may be lower given steep immigration cuts since Trump’s second term began in January.
Bowman said she began advocating for a rate cut in July during the Fed’s June meeting. Trump, meanwhile, claimed the latest jobs figures were “rigged” and dismissed the commissioner of the Bureau of Labor Statistics shortly after the report’s release.
- Check out our free forex signals
- Follow the top economic events on FX Leaders economic calendar
- Trade better, discover more Forex Trading Strategies
- Open a FREE Trading Account
Save