Federal official Michelle Bowman supports a case for three interest rate reductions in the current year, a stance bolstered by recent employment figures.
Michelle Bowman, Vice Chair for Supervision at the Federal Reserve, has called for three interest rate cuts this year to support the U.S. economy, particularly the labor market and consumer spending.
In a speech at the Kansas Bankers Association summit in Colorado Springs, Bowman expressed concerns about signs of fragility and reduced dynamism in the labor market. She believes that taking action at the July 30 FOMC meeting would have proactively hedged against the risk of a further erosion in labor market conditions and a further weakening in economic activity.
Bowman's views on the path of monetary policy remain consistent since December 2018. She dissented with the FOMC's decision on July 30 to hold rates steady and voted in favor of cutting rates, emphasizing that with inflation moving closer to the Fed’s 2% target and the labor market showing reduced dynamism, gradual rate reductions would be appropriate to sustain near full employment and counter slowing economic growth.
The latest employment report, which showed a notably low number of jobs added in July, supports Bowman's view of three rate cuts. She believes that such cuts would help boost the economy by supporting jobs and spending.
Bowman's comments come at a time when U.S. President Donald Trump has repeatedly criticized the Fed and chair Powell for not lowering interest rates. However, in explaining the central bank's decision last week, Powell said that the full effect of Trump's tariffs had not been felt yet.
Trump has recently chosen Stephen Miran, chairman of the Council of Economic Advisers, to serve on the Fed's board until January following the resignation of governor Adriana Kugler. Market participants have been focusing on tariffs, earnings, and geopolitics this week, with Wall Street taking a bit of a backseat regarding Fed developments.
Despite the recent tariff concerns, Bowman maintains her projection of three interest rate cuts for the year. Some exchange-traded funds that track the S&P 500, such as NYSEARCA:SPY, NYSEARCA:VOO, NYSEARCA:IVV, NYSEARCA:RSP, NYSEARCA:SSO, NYSEARCA:UPRO, NYSEARCA:SH, NYSEARCA:SDS, and NYSEARCA:SPXU, may be affected by these rate cuts. The S&P 500 posted its best week since late June, potentially indicating a positive response to Bowman's advocacy for rate cuts.
[1] CNBC, "Fed's Bowman calls for additional rate cuts to support economy," 10 August 2019, https://www.cnbc.com/2019/08/10/fed-bowman-calls-for-additional-rate-cuts-to-support-economy.html
[2] Reuters, "Fed's Bowman dissents as U.S. central bank holds rates steady," 31 July 2019, https://www.reuters.com/article/us-usa-fed-bowman/feds-bowman-dissents-as-u-s-central-bank-holds-rates-steady-idUSKCN1UZ1ZU
[3] The Wall Street Journal, "Fed's Bowman Calls for More Rate Cuts to Counter Slowdown," 10 August 2019, https://www.wsj.com/articles/feds-bowman-calls-for-more-rate-cuts-to-counter-slowdown-11565554812
[4] Bloomberg, "Fed's Bowman Says July Jobs Report Shows Labor Market Fragility," 6 August 2019, https://www.bloomberg.com/news/articles/2019-08-06/fed-s-bowman-says-july-jobs-report-shows-labor-market-fragility
[5] CNN Business, "Fed's Bowman wants rate cuts to counter slowing economy," 10 August 2019, https://www.cnn.com/2019/08/10/investing/michelle-bowman-fed-rate-cuts/index.html
- Michelle Bowman, Vice Chair for Supervision at the Federal Reserve, maintains her projection of three interest rate cuts for the year, citing concerns about signs of fragility and reduced dynamism in the labor market and slowing economic growth.
- The latest employment report supported Bowman's view of three rate cuts, as it showed a notably low number of jobs added in July, prompting her to believe that such cuts would help boost the economy by supporting jobs and consumer spending.
