US Fed Official Signals Labor Market Concerns, Supports Rate Cuts

WASHINGTON: A recent report on the state of employment in the United States revealed “indications of instability” in the job sector, according to a high-ranking official from the central bank. This assessment supports the possibility of three reductions to interest rates this year as a measure to prevent further decline.

In her prepared speech at a summit held in Colorado, Federal Reserve Vice Chair for Supervision Michelle Bowman advocated for a “proactive strategy” regarding the reduction of the standard lending rate.

She stated that implementing such a strategy “would be beneficial in preventing any further unnecessary deterioration of the labor market” and would lower the likelihood of the Fed’s rate-setting committee needing to implement a more substantial cut should conditions in the job market worsen.

Bowman also argued that the price escalations resulting from President Donald Trump’s extensive tariffs this year will probably only have “a one-time effect.”

She anticipates that the rate of inflation will revert to the Fed’s desired two-percent level after the impacts of the tariffs diminish.

In her remarks, she further stated, “It is fitting to disregard briefly elevated inflation readings and, as a result, alleviate certain policy restrictions to avert weakness in the labor market.”

Bowman was among the two Fed governors who opposed the central bank’s policy meeting in July, which is unusual even as authorities opted to maintain interest rates at their current levels for the fifth consecutive time.

Her most recent statements highlight the increasing disagreements among Fed policymakers about when the independent central bank should recommence lowering rates. The Fed has encountered significant pressure from Trump lately, as the president has consistently criticized Fed Chair Jerome Powell for the choices made to maintain rates.

Bowman, who received a nomination to the Fed’s board from Trump in 2018, also questioned government data regarding declining survey response rates and other matters, asserting that the monthly statistics are becoming increasingly challenging to decipher.

Even as she recognized the weakness in the labor market, she stated that she was still “wary of taking too much signal from data releases.”

On the same day that the Labor Department made public July’s employment data, which revealed weaknesses in the market with job figures for May and June significantly revised downward by 258,000 positions, Trump instructed for the dismissal of the commissioner of labor statistics.

He made an accusation, without offering proof, that commissioner Erika McEntarfer was manipulating data to achieve certain political objectives.