US Fed official says bank should be ready to cut rates
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Ms Michelle Bowman, the Fed’s vice-chair for supervision. believes inflation is on a “sustained trajectory” towards the Fed’s longer-term 2 per cent target.
PHOTO: REUTERS
- Fed official Michelle Bowman says policymakers should cut rates further if the jobs market shows "fragility".
- Bowman notes slowing economic growth and labour market issues, believing tariff inflation effects are "one-off".
- She advocates focusing on employment risks and stabilising the labour market, as it "can appear to be stable right up until it doesn't."
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WASHINGTON - A key US Federal Reserve official said on Jan 16 that central bank policymakers should be ready to lower interest rates further, citing “fragility” in the jobs market.
“Absent a clear and sustained improvement in labour market conditions, we should remain ready to adjust policy to bring it closer to neutral,” said Ms Michelle Bowman, the Fed’s vice-chair for supervision.
In prepared remarks to a forum in Massachusetts, Ms Bowman said inflation was initially a concern for her in 2025.
But her views changed as she began observing “clearer signs of slowing economic growth and increasing fragility in the labor market.”
She added that she grew more confident that the inflationary effects from President Donald Trump’s sweeping tariffs would also “largely be one-off.”
Looking ahead, Ms Bowman believes that inflation is on a “sustained trajectory” towards the Fed’s longer-term 2 per cent target.
“My view is that we should continue to focus on risks to our employment mandate and preemptively stabilise and support labour market conditions,” she said.
She also warned that the employment market could weaken further: “The labour market can appear to be stable right up until it doesn’t.”
The Fed’s next policy meeting is scheduled for Jan 27-28.
Policymakers are widely expected to keep interest rates unchanged as they assess the effects of three consecutive rate cuts in 2025.
Ms Bowman had backed all three of the Fed’s quarter-percentage-point reductions.
But Mr Trump has repeatedly called for rates to be slashed more to boost the economy, slamming Fed chair Jerome Powell for not backing aggressive rate cuts. AFP
