Bowman outlines economic outlook, cites labor market fragility

At its September 2025 meeting, the Federal Open Market Committee (FOMC) resumed the process of gradually removing policy restraint, bringing the federal funds rate closer to its neutral level.

The Committee voted to lower the target range for the federal funds rate by 25 basis points at its September, October, and December meetings, bringing the range to 3-1/2 to 3-3/4 percent.

Governor Bowman stated these decisions were intended to proactively limit the risk of greater and more persistent damage to the labor market.

She noted that inflation continued to show signs of a sustained downward trajectory toward the 2 percent objective.

The policy rate now reflects a total of 75 basis points of cuts since September 2025, moving closer to her estimate of its neutral level.

Bowman voted in favor of each action, citing weakening labor market conditions and her expectation that inflation, excluding tariffs, would soon be within close range of the 2 percent goal.

She emphasized the importance of continuing to assess the appropriate path of policy and timing of further adjustments as new evidence emerges.

Governor Bowman detailed the evolution of her economic views over the past year, noting a shift from an initially optimistic outlook.

She observed clearer signs of slowing economic growth and increasing fragility in the labor market.

This led her to believe that tariff-related inflationary effects would be temporary, as businesses showed less ability to pass through higher costs.

Consequently, she placed greater weight on employment risks, dissenting in July 2025 for a rate reduction.

Higher productivity gains, partly due to AI adoption, also eased inflationary pressures, supporting her policy rate decisions.