Fed’s Bowman Warns Of Layoffs Risk If Demand Conditions Don’t Improve: ‘We Are At Serious Risk Of Already Being Behind The Curve’

Federal Reserve Governor Michelle Bowman warned on Tuesday of the risk that businesses may lay off workers if underlying demand conditions do not improve.

In remarks at a Kentucky Bankers Association event, Bowman expressed optimism following the Fed’s rate cut last week, but remained concerned about the labor market. “We are at serious risk of already being behind the curve in addressing deteriorating labor market conditions. Should these conditions continue, I am concerned that we will need to adjust policy at a faster pace and to a larger degree going forward.”

Bowman said she has been pointing out signs of labor market weakness for several months. “If demand conditions do not improve, businesses may need to begin to lay off workers, recognizing that it will not be as difficult to rehire given the shift in labor market conditions,” she said.

Last week, the Fed cut the key borrowing rate by 25 basis points, bringing down the federal funds rate to the 4% to 4.25% range, in line with market expectations. While Bowman supported the cut, she added that the Federal Open Market Committee (FOMC) should have started lowering the policy rate in July.

She also expressed concerns about softer economic growth while stating that President Donald Trump’s tariffs will only have a small and short-lived effect on inflation going forward. “It is time for the Committee to act decisively and proactively to address decreasing labor market dynamism and emerging signs of fragility,” she added.

Meanwhile, U.S. equities declined in Tuesday morning’s trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was down 0.02%, while the Invesco QQQ Trust (QQQ) fell 0.22%. Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘bullish’ territory.

The iShares 7-10 Year Treasury Bond ETF (IEF) was up 0.05% at the time of writing.

Also See: Gold Prices Climb To Fresh Record High

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