(Crypto City Note: As of 8/11 13:30 when this article was published, Bitcoin briefly rose to around $122,300, and the current price is $121,990, with the historical high at $123,091.)
Federal Reserve Governor Michelle Bowman stated on Saturday (8/9) that the latest weak employment report highlights the vulnerability of the labor market, further solidifying her forecast for three rate cuts this year. This statement stands out particularly in the conservative atmosphere within the Federal Reserve and adds new variables to upcoming interest rate decisions.
The labor market shows signs of weakness
According to the July data released by the U.S. Department of Labor on August 2, the unemployment rate rose to 4.2%, with Bowman even describing it as 'close to rounding up to 4.3%.'
At the same time, the employment growth in previous months has been significantly revised down, with the average new jobs added over the past three months being only 35,000, far lower than the 100,000 monthly level generally considered necessary to maintain a stable labor market. She pointed out that this reflects a clear cooling of labor demand.
The delicate balance between unemployment and inflation
In economics, there is a so-called 'Phillips Curve' relationship between unemployment and inflation: when the unemployment rate falls, a tight labor market drives up wages and prices; conversely, when the unemployment rate rises, it usually suppresses inflation. However, under supply chain shocks, tariff policies, or fluctuations in energy prices, both may rise simultaneously, leading to stagflation.
The Federal Reserve's dual mandate is to maintain full employment and price stability, so it must strike a balance between unemployment and inflation. Bowman's view is based on the current rise in the unemployment rate and weakened inflationary pressures, believing that monetary policy can begin to ease.
The cryptocurrency market quickly reacts to rate cut expectations
After Bowman reaffirmed the expectation of three rate cuts in 2025, the cryptocurrency market quickly surged. According to Binance data, as of August 11 at 08:00 UTC, the price of Bitcoin closed at $120,682.55, rising approximately 1.16% in a single day, reaching an intraday high of $120,800, a recent record high.
Analysts point out that the market expects the Federal Reserve's rate cuts to push down dollar yields and increase market liquidity, attracting funds into risk assets like Bitcoin. Ethereum and other mainstream cryptocurrencies also rose in tandem, reflecting investors' positive reactions to the prospects of loose monetary policy.
Further reading:
Bitcoin hovers around 114,000! The probability of a rate cut in September is as high as 92%, but semiconductor tariffs are about to be announced.
Sticking to the position of three rate cuts
Bowman's latest economic forecast clearly includes a plan for three rate cuts in 2025 and emphasizes that her position has not changed since December 2024. In her speech at the Kansas Bankers Association, she mentioned that if action had been taken in last week's (the last week of July) meeting, it would have 'preemptively countered the risks of further deterioration in the labor market and weak economic activity.' The Federal Reserve still has three policy meetings left this year in September, October, and December, becoming potential landing spots for her rate cut advocacy.
Policy differences and political pressure
Last month, the Federal Reserve maintained short-term interest rates between 4.25% and 4.50%, with Bowman and another governor, Christopher Waller, holding differing opinions.
This divergence occurs against the backdrop of the Trump administration continuously pressuring the Federal Reserve to ease monetary policy. At the same time, Trump is looking for a successor to current Chair Powell, with both Bowman and Waller listed as candidates. Trump even criticized the latest employment report on August 2 as 'fake' after the data was released and dismissed the head of the Bureau of Labor Statistics.
Inflation risk assessments trend optimistic
Bowman also pointed out that the latest inflation data has made her more confident that the Trump administration's tariff policies will not trigger persistent inflationary pressures.
Excluding price increases related to tariffs, the year-on-year growth rate of the core personal consumption expenditure price index is actually 'closer' to the 2% target, rather than the official statistic of 2.8%. She believes that policies such as tax cuts and deregulation will offset the negative impact of tariffs on the economy.
In her view, housing demand has dropped to its lowest level since the 2008 financial crisis, and the labor market's role in driving inflation has disappeared, 'the upward risk of price stability has weakened.' Therefore, gradually easing from the current 'moderately tight' monetary stance can reduce the risk of having to implement large-scale rate cuts in the future due to economic deterioration.
This article is republished with permission from: (Chain News)
Original title: (BTC 120K! Federal Reserve Governor Bowman calls for three rate cuts, should preemptively counter labor market deterioration)
Original author: Elponcho
'Bitcoin surges to 122,000, nearing all-time high! Federal Reserve Governor calls for three rate cuts, and the market reacts quickly' This article was first published in 'Crypto City'
