Bowman: Fed should be ready to cut rates again if needed

Investing.com -- Federal Reserve Vice Chair for Supervision Michelle Bowman said Friday the U.S. central bank should stand ready to cut interest rates again if needed, citing concerns about a fragile job market.

Speaking at the Outlook 26: The New England Economic Forum in Foxborough, Massachusetts, Bowman described the current stance of monetary policy as "moderately restrictive" and warned that labor market conditions "could continue to deteriorate in the coming months."

"Absent a clear and sustained improvement in labor market conditions, we should remain ready to adjust policy to bring it closer to neutral," Bowman said. She added that while monetary policy is not on a preset course, "we should also avoid signaling that we will pause" on further rate cuts "without identifying that conditions have changed."

Bowman noted that risks to the Fed’s dual mandates of price stability and maximum employment are uneven, with job market concerns outweighing inflation worries. She said inflation pressures are likely to ease as the impact of trade tariffs wanes, with underlying inflation now closer to the Fed’s 2% target.

"My baseline expectation is that economic activity will continue to expand at a solid pace and the labor market will stabilize near full employment as monetary policy becomes less restrictive," Bowman said.

The Fed vice chair emphasized that policymaking should be forward-looking and driven by forecasts "informed by a broad set of indicators and by ongoing engagement with businesses and communities across the country."

Bowman expressed concern that firms may begin shedding workers unless there is improvement in demand, highlighting the need for policy to focus on supporting the job market. She also noted that wage growth is now consistent with the Fed’s 2% inflation target and that the central bank has made "considerable progress" in lowering inflation.

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