Federal Reserve Vice Chair for Supervision Michael Barr: The "fragile" job market proves that further rate cuts are warranted

Following Trump's "iron fan" Stephen Miran, another long-time decision-maker with voting rights on the Federal Open Market Committee (FOMC) has publicly voiced support for interest rate cuts.

On Thursday, Eastern Time on the 25th, Michelle Bowman, the Vice Chair for Supervision at the Federal Reserve, clearly stated that inflation is sufficiently close to the Fed's 2% target, and the labor market is "weaker" than expected, providing justification for further rate cuts. Following Miran, Bowman is another official who explicitly supports rate cuts and permanently holds voting rights in FOMC meetings during her tenure.

On Thursday, Bowman emphasized that the inflation rate is "within" the Fed's target range. She believes that the impact of tariffs on price increases may be temporary. Bowman has consistently advocated for interest rate cuts by the Fed, highlighting risks in employment, and stated on Tuesday that faster rate cuts may be needed in the coming months.

On Thursday, Miran warned that the current policy interest rate of the Fed is significantly above the "neutral" level and is in a "highly restrictive" range, making the economy more vulnerable to downside shocks. He favors a series of larger rate cuts to reach the neutral level, hoping to lower rates by 150 to 200 basis points.

Bowman Continues to Warn of Labor Market Deterioration

On Thursday, Bowman reiterated her concerns about the job market at an event at Georgetown University's Center for Financial Markets and Policy, a viewpoint she has maintained for several months. She pointed out that U.S. inflation is already sufficiently close to the Fed's target, but the labor market is "weaker" than expected.

On Tuesday, Bowman stated that since April, job growth has averaged only about 25,000 per month, far below the levels seen at the beginning of the year. She acknowledged that lower immigration levels are part of the reason but believes that "immigration cannot fully explain the slowdown in growth," with declining demand also being a significant factor.

Bowman warned on Tuesday that decision-makers are facing a serious risk of "falling behind the curve" and need to take decisive and proactive action. "After seeing the labor market conditions deteriorate for several months, it is time for the committee to take decisive and proactive action," she stated, adding that if these conditions persist, the Fed may need to adjust policy more quickly and significantly in the future.

Regarding tariffs, Bowman stated on Tuesday that she is now more convinced that the impact of tariffs on inflation will be "small and short-lived."

Bowman was nominated by President Trump to be a Federal Reserve Governor and Vice Chair for Supervision. At last month's FOMC meeting, where the Fed decided to hold steady, she and Miran were the only two voting members supporting a 25 basis point rate cut. Bowman has also urged action to begin at the June meeting. She is reportedly one of the candidates to succeed Powell as the next Fed Chair.

Miran Advocates for "Temporary and Significant" Rate Cuts

Miran publicly advocated on Thursday that the Fed should immediately take more aggressive rate-cutting measures. He believes that the current federal funds rate in the range of 4% to 4.25% is significantly higher than his estimated "neutral" rate level "When monetary policy is in such a restrictive stance, the economy becomes more vulnerable to downward shocks. In my view, we really do not need to take that risk," Milan stated. He supports quickly adjusting interest rates to neutral levels through a series of larger rate cuts.

Milan clearly stated, "My view is that we can achieve the goal through a very brief round of rate cuts, each by 50 basis points, to readjust monetary policy first, and once we reach that level, we can act more cautiously."

As a new board member nominated by Trump and sworn in last week, Milan cast the only dissenting vote in last week's FOMC rate decision, advocating for a 50 basis point cut instead of the 25 basis points supported by other voting members. He also mentioned that increased tariff revenues and immigration waves are pressing down neutral interest rates, emphasizing that significant population fluctuations will have substantial consequences.

This year's voting members, including Goolsbee, adopt a cautious stance

In contrast to the aggressive rate-cutting stance of Bowman and Milan, several other Federal Reserve officials expressed more cautious views this week.

Austan Goolsbee, the president of the Chicago Fed who has voting rights at FOMC meetings this year, stated on Thursday that further rate cuts may be possible if the risk of stagflation recedes, but he is "uncomfortable with too many concentrated rate cuts in the early stages," seeing the employment and inflation risk environment as "strange."

Goolsbee more explicitly stated in an interview on Tuesday that given the inflation rate is above target and on the rise, the Federal Reserve should remain cautious about further rate cuts. He believes the current monetary policy is in a "moderately restrictive" range, emphasizing the need to "be careful and not too aggressive."

Raphael Bostic, president of the Atlanta Fed who will have voting rights at FOMC meetings in 2027, stated on Tuesday that the Federal Reserve must remain vigilant about price pressures. He said, "In a situation where inflation has not reached the target for four and a half years, we absolutely need to keep an eye on this."

Discrepancies in decision-making reflect policy challenges

This divergence of views reflects the different judgments among Federal Reserve officials in addressing current economic challenges. Most officials, including Powell, remain cautious about the path of rate cuts, primarily considering that Trump's tariff policies may bring sustained inflationary pressures.

On Monday, three Federal Reserve officials poured cold water on rate cuts. Among them, Alberto Musalem, president of the St. Louis Fed with voting rights at FOMC meetings this year, stated that he supports last week's rate cut but expects limited further easing space. He anticipates that the price effects of tariffs will dissipate in the next two to three quarters but believes that the threat of second-round effects and sustained inflation must be monitored.

Bostic stated on Monday that due to concerns about inflation, he currently sees no reason for further rate cuts this year. Beth Hammack, president of the Cleveland Fed who will have voting rights at FOMC meetings in 2026, also expressed concerns about inflation on Monday, stating that caution is necessary in easing to avoid overheating the economy Last week, the Federal Reserve's FOMC meeting decided to cut interest rates by 25 basis points, marking the first rate cut of the year. The dot plot released after the meeting showed that among the 19 decision-makers, 7 expected no further rate cuts this year, while 10 anticipated a total cut of at least 50 basis points. Milan was the only official to vote against this decision.

This week, Milan also acknowledged that he was the only official in the dot plot to provide an expectation of a total rate cut of 150 basis points this year. On Monday, in his first public speech after taking office as a board member, Milan stated that following last week's rate cut, the Federal Reserve should implement a total cut of 125 basis points this year.

Milan revealed at that time that he might vote against in future FOMC meetings. He estimated the neutral interest rate to be around 2.5%, significantly lower than the median forecast of 3% by Federal Reserve officials