MNI: Fed Gov Bowman Sees 3 Cuts In '25, Greater Labor Risks

Federal Reserve Governor Miki Bowman on Saturday urged the FOMC to begin easing monetary policy to head off further weakening in the labor market, saying she's penciled in three cuts for the rest of the year.

"As I recognize that economic conditions are shifting, I believe that beginning to move our policy rate at a gradual pace toward its neutral level will help maintain the labor market near full employment and ensure smooth progress toward achieving our dual mandate," she said in remarks prepared for a Kansas Bankers Association meeting in Colorado Springs, Colo.

"I see the risk that a delay in taking action could result in a deterioration in labor market conditions and a further slowing in economic growth." 

The risks to the labor market side of the Fed's dual mandate are now greater than that of the inflation side, she said. 

The unemployment rate moved back up in July and was close to rounding up to 4.3% as firms reduced hiring, she noted. The employment-to-population ratio has also dropped significantly this year, suggesting more softening in labor market conditions than the unemployment rate implies, she said. 

Meanwhile, core PCE inflation stood at 2.8% in June, a bit lower than at the end of last year, and would have been below 2.5% if one-off tariff effects on goods prices were stripped out, she said. 

"The underlying trend in core PCE inflation appears to be moving much closer to our 2% target than is currently shown in the data," she said. 

"This progress reflects a considerable slowing in core services inflation, which is consistent with recent softness in consumer spending and the labor market no longer being a source of inflation pressures."

"As I gain even greater confidence that tariffs will not present a persistent shock to inflation, I see that upside risks to price stability have diminished. With underlying inflation on a sustained trajectory toward 2 %, softness in aggregate demand, and signs of fragility in the labor market, I think that we should focus on risks to our employment mandate."