Influential voice adds to growing clamor for rate reductions
Federal Reserve vice chair for supervision Michelle Bowman has once again called for interest rates to move lower, saying Friday that growing labor market risks mean the central bank will need to cut in the months ahead.
Bowman’s comments, delivered in a speech at the Forecasters Club of New York, follow remarks earlier this week by Fed governor Stephen Miran arguing for big rate reductions soon.
She highlighted a “materially more fragile labor market” and downplayed the possibility of upward pressure on inflation because of President Trump’s trade war. “We are at serious risk of already being behind the curve in addressing deteriorating labor market conditions,” she said.
“Should these conditions continue, I am concerned that we will need to adjust policy at a faster pace and to a larger degree going forward.”
The Fed cut rates for the first time in 2025 last week, reducing its funds rate by 25 basis points to a target range between 4% and 4.25%. Bowman supported that move, but had also called for a cut in July when a majority of her colleagues backed a rate hold.
Fed chair Jerome Powell has continually cited tariffs and the trade war as prominent reasons for a cautious approach to monetary policy, drawing Trump’s ire for not bringing rates lower earlier.
But Bowman said Friday that when tariffs are removed from inflation calculations, the consumer price index (CPI) has “continued to hover not far above our target,” and suggested addressing labor market fears was more important than meeting the Fed’s 2% goal.
The Federal Reserve’s main inflation measure showed core prices rising largely in line with expectations in August, keeping the Federal Reserve on course for two more interest rate cuts this year.https://t.co/alduI0f8eF
— Mortgage Professional America Magazine (@MPAMagazineUS) September 26, 2025
Bowman also said she wanted the Fed to run “the smallest balance sheet possible” and flagged the risk of relying purely on the sale of mortgage-backed securities to simplify the Fed’s portfolio.
Ten-year Treasury yields, a key driver of 30-year fixed US mortgage rates, jumped Friday and hit 4.177% at time of writing – climbing to their highest level since the beginning of this month.
Mortgage rates also ticked up for the first time since July as financial markets hold their breath ahead of a pivotal week for US jobs data.
Labor market reports set to arrive next week include initial jobless claims, job openings, and nonfarm payrolls – although the latter could be imperiled by a potential government shutdown if lawmakers can’t strike a deal on funding by October 1.
That data will offer fresh insights into how the labor market is performing and act as a critical gauge for Fed decisionmakers of the economy’s resilience – and whether more rate cuts are needed.
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