Federal Reserve Governor Michelle Bowman, speaking at the Kansas Bankers Association conference in Colorado on August 9, 2025, reinforced her stance on the need for three interest rate cuts before the end of the year, citing the latest disappointing jobs report as further evidence of a softening economy.
Her comments come just days after the Federal Open Market Committee (FOMC) voted to hold rates steady at its July meeting, where Bowman was one of two dissenters advocating for immediate action.
Bowman’s speech, titled “Thoughts on the Economy and Community Bank Capital,” highlighted a resilient yet increasingly fragile U.S. economy, with underlying growth slowing markedly this year.
She emphasized that proactive rate reductions could prevent unnecessary weakening in the labor market while aligning with the Fed’s dual mandate of maximum employment and price stability.
The July employment report, released on August 1, 2025, by the Bureau of Labor Statistics, showed nonfarm payrolls rising by only 73,000—well below economists’ expectations of around 104,000 to 117,000.
This followed a meager 14,000 gain in June, with significant downward revisions totaling 258,000 jobs for prior months, bringing the three-month average payroll growth down to approximately 35,000 per month.
The unemployment rate edged up to 4.2%, nearing 4.3% when rounded, driven primarily by reduced hiring rather than widespread layoffs.
Job gains were concentrated in sectors like healthcare and social services, while the employment-to-population ratio declined, indicating broader labor market softening.
Average hourly earnings rose by 0.3% to $36.44, and the average workweek increased slightly to 34.3 hours.
These figures have heightened concerns about economic momentum, prompting Bowman to state, “In my view, economic conditions appeared to be shifting, and as a result, we should reflect this shift in our policy decisions.”
| Month | Nonfarm Payrolls Added | Unemployment Rate | Key Revisions |
|---|---|---|---|
| July 2025 | +73,000 | 4.2% | N/A |
| June 2025 | +14,000 (revised) | 4.1% (prior) | Downward by part of -258,000 total |
| May 2025 | Revised downward | N/A | Part of -258,000 total |
Inflation Trending Toward 2% Target
Bowman expressed growing confidence that inflation is approaching the Fed’s 2% target, despite lingering above it.
Core PCE inflation was 2.8% in June 2025, but adjusting for tariff effects, it would be below 2.5%.
Headline CPI rose to 2.7% year-over-year in June, up from 2.4% in May, with forecasts for July showing a slight increase to 2.8% due to tariff impacts.
The Cleveland Fed’s nowcast estimates July CPI at 2.72% and core at 3.04%.
On President Donald Trump’s tariffs, Bowman downplayed long-term risks, describing them as a “one-time effect on prices” with foreign suppliers absorbing costs and limited second-round effects due to economic slack.
She noted, “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.”
This contrasts with fears of stagflation—a stagnant economy with high inflation—where the Fed’s tools are limited.
Inflation has fallen from post-pandemic peaks above 9%, but remains sticky above target.
Bowman anticipates it returning to 2% as tariff effects fade, supported by potential supply boosts from deregulation and tax cuts.
Call for Three Rate Cuts Reinforced by Data
Bowman reiterated her projection for three rate cuts in 2025, consistent since December 2024, stating, “My Summary of Economic Projections includes three cuts for this year… and the latest labor market data reinforce my view.”
With the federal funds rate at 4.25%-4.5%, cuts could lower borrowing costs for homes and cars, stimulating growth but risking inflation reacceleration.
The FOMC has three meetings left in 2025: September 16-17, October 28-29, and December 9-10.
Fed Chair Jerome Powell has emphasized waiting for more data on tariff impacts before acting.
| Upcoming FOMC Meetings (2025) | Expected Focus |
|---|---|
| September 16-17 | Potential first rate cut; market probability ~89-93% for 25 bps reduction |
| October 28-29 | Assessment of post-cut effects and updated economic projections |
| December 9-10 | Year-end decision, possibly final cut if conditions warrant |
Market expectations have shifted dramatically, with traders pricing in an 89-93% chance of a 25-basis-point cut in September, up from 37.7% a week prior, per CME Group’s FedWatch tool.
Broader Implications and Market Reactions
Bowman’s dissent and comments underscore internal Fed divisions amid Trump administration pressures, including personal criticisms of Powell and the opportunity to appoint a new governor.
Lower rates could boost equities and crypto markets, as seen in X discussions linking cuts to altcoin gains.
However, they might squeeze bank margins and exacerbate stagflation risks if tariffs persist.
As of August 10, 2025, her speech has sparked renewed debate, with analysts like those at JPMorgan advancing forecasts for a September cut.
The Fed must balance supporting jobs against inflation control, with the next CPI report potentially pivotal.
Bowman’s proactive stance positions her as a key voice for easing in a tariff-challenged economy.
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