Bowman Urges Fed to Prepare for Rate Cuts Amid Rising Job Market Vulnerabilities

Federal Reserve Governor Lisa Bowman has called for heightened readiness among policymakers to implement additional rate cuts, warning of emerging vulnerabilities in the U.S. labor market. Speaking in a recent policy address, she emphasized that recent economic data suggests a potential shift toward softer job growth, which could undermine the economy’s resilience if not addressed proactively. Recent figures show the unemployment rate rising to 4.9% in December 2025, up from 4.4% in the prior year, while nonfarm payrolls grew by only 128,000 jobs—well below the 200,000 monthly average seen in 2024. These trends have prompted concerns that the labor market may be cooling more rapidly than anticipated, especially given the sharp decline in hiring within services and manufacturing sectors. Inflation metrics remain mixed: core PCE inflation stood at 2.6% in November 2025, still above the Fed’s 2% target but showing signs of moderation. However, Bowman stressed that sustained disinflation is not guaranteed, particularly if wage pressures persist or consumer spending weakens further. She warned against premature policy tightening, noting that a 25-basis-point rate hike implemented in June 2025 had contributed to slowing job creation without significantly improving inflation outcomes. Market participants have reacted with increased anticipation of a rate cut in mid-2026. Futures pricing now reflects a 68% probability of a reduction by the July 2026 FOMC meeting. Sectors sensitive to borrowing costs—including housing, small business lending, and capital-intensive industries—are already adjusting their outlooks, with home mortgage applications declining 12% month-over-month as of January 2026.