Fed Divide Widens: Goolsbee Holds Back, Bowman Calls for Quicker Cuts

TradingKey — On Tuesday, September 23, Chicago Fed President Austan Goolsbee said the U.S. economy is contending with slowing growth and a softening labor market, and he cautioned against rushing into further rate cuts. Meanwhile, Fed Governor Michelle Bowman pushed back, arguing that the central bank is already lagging behind reality and must act decisively to counter fresh signs of labor market deterioration.

The Fed’s first rate cut of the year, a widely anticipated 25-basis-point move last week, may mark only the start of a broader easing cycle. Nick Timiraos, the "Fed whisperer," expects consecutive cuts in October and December.

Goolsbee: Labor Market Holding Up

Speaking to CNBC, Goolsbee said rate cuts can proceed but only gradually, and only if policymakers successfully navigate the lingering threat of stagflation.

He endorsed the FOMC’s median projection that the neutral rate sits around 3.1%, implying roughly 100 basis points of easing ahead. 

But he stressed that with inflation running above target for four and a half straight years and still trending higher, policy should be guided by patience rather than haste.

Tuesday’s Chicago Fed labor market update showed unemployment likely held steady in September. Goolsbee called the labor market “very stable” so far. Even with hiring cooling sharply, he noted August’s 4.3% jobless rate remains historically low.

Bowman: Bigger Cuts May Be Needed Later

Bowman warned that recent data — including downward revisions to payroll figures — prove the Fed is already behind the curve. If labor market weakness persists, she said, the central bank may be forced into deeper, faster cuts down the road.

She also called for a strategic pivot in the Fed’s decision-making approach, warning that reliance on backward-looking data is inherently reactive. She urged a shift toward forward-looking forecasts to enable preemptive action before conditions worsen.