The Federal Reserve Board published remarks by Vice Chair for Supervision Michelle W. Bowman explaining her support for the Federal Open Market Committee decision to keep the federal funds rate target range unchanged at 3-1/2 to 3-3/4 percent and outlining an outlook in which policy moves closer to neutral over 2026, with three rate cuts in her projections. Her core concern is that the labor market remains fragile even as inflation appears to be moving closer to 2 percent once one-off tariff effects fade. Bowman said she saw the January decision as a choice between continuing to remove restraint quickly, potentially reaching her estimate of neutral by the April meeting, or moving toward neutral at a more measured pace. After a total of 75 basis points of rate cuts late last year, she favored waiting to assess how the lower degree of restraint is flowing through to financial conditions and the labor market, citing statistical noise in recent data associated with the government shutdown and noting that two additional inflation and employment reports would be available by the March meeting. On conditions, she pointed to subdued private payroll gains of about 30,000 per month in the fourth quarter, an unemployment rate of 4.4 percent in December that is up 1/4 percentage point since mid last year, and a sharp drop in the Conference Board job availability index, while arguing that underlying inflation is closer to target than headline core PCE measures suggest. She stressed that policy is not on a preset course and argued against signaling an extended hold if labor market risks persist, while also cautioning against overreacting to volatile first-quarter data or a potential January inflation pickup driven by seasonality or measurement challenges.

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