The official representative of the Federal Reserve supports a reduction in interest rates

• Michael Bowman supports a reduction in rates due to poor data on employment.
• The Federal Reserve has only three meetings left this year to make decisions.
• Trump calls for a reduction in rates, criticizing the leadership of the Federal Reserve.

New York (AP) — The official representative of the Federal Reserve, Michael Bowman, stated on Saturday that the recent labor market report in the U.S., which turned out to be significantly worse than expected, reinforces her view that interest rates should be lowered.

Bowman was one of two Federal Reserve representatives who forecast a rate cut this month. This could stimulate the economy, making it easier to purchase homes or cars, but it could also risk higher inflation.

She and other officials predicted that nine other Federal Reserve representatives would advocate for keeping rates at their current level, as this is expected to continue throughout the year. The head of the Federal Reserve, Jerome Powell, is counting on additional data regarding the impact of President Donald Trump's tariffs on inflation before making the next decisions.

At a bankers' conference in Colorado, Bowman noted that "the latest data on the labor market reinforces my thinking" about the necessity of three rate cuts this year. Only three meetings remain for the Federal Reserve in 2025.

The report on job openings released last week indicated that employers hired significantly fewer workers than expected. It also showed that hiring in the previous month was notably lower than the start of the year.

Regarding inflation, Bowman expressed confidence that Trump's tariffs "do not create a permanent shock for inflation," and believes that inflation will converge to the Federal Reserve's target level of 2%. It has decreased significantly from a peak above 9% after the pandemic, but remains above 2%.

The Federal Reserve's mandate is to support a strong labor market and control inflation. It has only one main tool for influencing this area, and changing rates often harms one side of the equation.

There is a concern that Trump's tariffs could hinder the Federal Reserve, stalling the economy in a "stagflation" scenario where the economy stagnates but inflation is high. The Federal Reserve does not have an effective tool for solving this problem and is likely to be caught between the labor market and inflation.

At Wall Street, it is expected that the Federal Reserve will lower rates at the next meeting in response to the labor market report, which turned out to be significantly worse than economists had predicted.

Trump has repeatedly called for a reduction in interest rates, often personally criticizing Powell. He may have the opportunity to appoint another member to the Federal Reserve Board after one of the nominees of former President Joe Biden left his position.

Tags: USA/Economy