US Fed's Bowman: Latest jobs data stiffens support for three rate cuts in 2025

Federal Reserve Vice Chair Michelle Bowman reaffirmed her conviction for three interest rate cuts this year, citing recent Labor Department data indicating significant labor market weakening. The report, which showed the unemployment rate rising to 4.2% and job gains slowing to a 35,000 monthly average, reinforces her concerns about the employment mandate and diminishes upside risks to price stability, with underlying inflation nearing the 2% target excluding tariff impacts. Bowman's consistent dovish stance, following her recent dissent on holding rates, signals growing internal Fed support for easing monetary policy amid softening economic conditions.

Analysis

Federal Reserve Vice Chair Michelle Bowman has significantly reinforced her dovish stance, citing recent labor market data as justification for her forecast of three interest rate cuts this year. Bowman, who dissented at the last FOMC meeting in favor of a cut, pointed to a rise in the unemployment rate to 4.2% and a sharp deceleration in job creation to a 35,000 monthly average as evidence of labor market fragility. This slowdown, she argues, warrants a proactive policy response to hedge against further economic weakening. Critically, Bowman dismisses concerns that tariffs will fuel persistent inflation, suggesting that underlying price pressures, excluding tariff effects, are already "much closer" to the Fed's 2% target than the official 2.8% core PCE reading indicates. Her commentary, which also noted housing demand is at its weakest since the financial crisis, signals a growing conviction within a faction of the Fed that risks are now skewed towards the employment mandate, justifying an imminent and gradual easing of the current moderately restrictive policy.

Key Decisions for Investors

• Investors should increase their probability weighting for near-term interest rate cuts, as Bowman's explicit call for three cuts this year, supported by weakening labor and housing data, signals a growing dovish sentiment within the FOMC.
• Monitor upcoming high-frequency labor market indicators, such as weekly jobless claims and monthly employment reports, with heightened scrutiny, as further deterioration will likely serve as the primary catalyst for the Fed to initiate an easing cycle.
• Consider adjusting portfolio positioning to reflect a potentially faster-than-expected policy pivot by favoring rate-sensitive assets like long-duration bonds and being cautious on cyclical sectors vulnerable to a significant economic slowdown.