Fed Officials Signal Imminent Interest Rate Cuts Amid Labor Market Weakness

Investors widely anticipate the Federal Reserve will cut its benchmark interest rate at the September meeting, with odds around 88% according to CME Group’s FedWatch tool. This sentiment is supported by weaker-than-expected U.S. job market data and dissent within the Fed, notably from Vice Chair Michelle Bowman, who advocates for faster rate cuts to protect the weakening labor market. Bowman, one of two dissenters in the last Fed vote, argues that earlier action would have mitigated risks of further economic slowdown and expects three rate cuts this year, citing recent employment reports showing slowing job gains and rising unemployment. While Fed Chair Jerome Powell remains cautious, waiting for more data on the impact of President Donald Trump’s tariffs on inflation, Bowman believes tariffs will not cause persistent inflation shocks and sees inflation moving closer to the Fed’s 2% target. The debate highlights the Fed’s challenge in balancing labor market support with inflation control, with pressure from the Trump administration influencing nominations to the Fed and policy direction. Prospective homebuyers and markets also watch closely, as mortgage rates tend to follow Fed benchmarks.