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We haven’t heard much from Bowman since she was ruled out as a candidate for Fed Chair.US economy has been resilientWage growth consistent with 2% inflationFed has made considerable progress in lowering inflationUnderlying inflation levels closer to Fed’s 2% targetSays she is concerned about labor market fragilityFirms may start shedding workers unless there is demand improvementExpects ‘solid’ growth, lower inflation and stabilizing job marketGiven risks, Fed policy should be focused on supporting job marketFed policymaking should be forward looking and driven by forecastsInflation pressures are easing as tariff influences abateMonetary policy is ‘moderately restrictive’ right nowRisk to Fed’s mandates is asymmetric, with job risks outweighing inflation concernsU.S. central bank should stand ready to cut interest rates again given labor market risksGiven risks, Fed should not signal a pause in rate-cutting campaignI thought Bowman might pivot back to being more hawkish after losing her bid for Fed chair but she’s hanging in there. The ‘moderately restrictive’ take is out of consensus with the vast majority of Fed members seeing policy as either within the range of neutral or close. Her view that the jobs market risks are higher is defensible as most of the employment created in the US last year as in healthcare and AI is certainly a risk to layoffs. That said, the latest economic data has been good and this week’s jobless claims number was the lowest of Trump’s second term. Most Fed members want to see convincing evidence that inflation is at 2% and it’s just not there, with the upcomign PCE report likely at 3%. She dismisses that by shifting to ‘underlying’ inflation but that same underlying inflation has also been aided by a rapid decline in oil prices that might not be sustainable. As the year goes on, she will be an interesting voice to monitor because there will be votes that are close calls and she could easily shift back to being a hawk if prices pick up.
This article was written by Adam Button at investinglive.com.
💡 DMK Insight
Bowman’s concerns about labor market fragility could signal a shift in Fed policy, and here’s why that matters: The U.S. economy’s resilience has been a double-edged sword. While wage growth aligns with the Fed’s 2% inflation target, Bowman’s warning about potential job cuts suggests underlying vulnerabilities. If firms start shedding jobs, it could prompt the Fed to reconsider its current stance on interest rates. Traders should be aware that any signs of labor market weakness could lead to a dovish pivot, impacting not just equities but also the forex market, particularly USD pairs. Keep an eye on economic indicators like jobless claims and non-farm payrolls in the coming weeks, as these will be critical in shaping market sentiment. Moreover, if inflation continues to trend downwards while labor markets weaken, we might see a divergence in asset performance. For instance, commodities could react differently than equities, depending on how investors interpret the Fed’s next moves. Watch for key support levels in major indices and the dollar index, as these could provide insights into market direction based on Fed reactions.
📮 Takeaway
Monitor upcoming jobless claims and non-farm payrolls; a labor market downturn could shift Fed policy and impact USD pairs significantly.
