While officials are still keeping an eye on inflation, San Francisco Fed President Mary Daly said the risks of a quick decline in the labor market mean that the Fed should act soon.
As inflation remains stubborn and concerns about the labor market rise, several Federal Reserve officials are now saying that interest rate cuts may be imminent.
That's a change in tone from last week, when most Fed policymakers voted to leave their influential interest rate unchanged for the fifth time this year. Fed officials had been content to wait and see how tariffs were moving through the economy, but the July jobs report raised concerns that the economy wasn't as strong as previously thought.
In a series of public remarks this week, Fed officials said that the weakening in the labor market could prompt them to cut interest rates sooner rather than later.
"Wage growth is coming down. We've seen the jobs number and consumer spending is cooling. All of that suggests the real underlying economy is slowing," said Minneapolis Fed President Neel Kashkari in a CNBC interview. "That means in the near term, it may become appropriate to start adjusting the federal funds rate."
While Kashkari said that weakening jobs data could force the Fed to act, he maintained his projections that the central bank will enact only two interest rate cuts this year. The Federal Open Market Committee, which has kept rates steady throughout the year, has three more meetings scheduled for 2025, with the next interest rate decision coming on Sept. 17.
The Bureau of Labor Statistics reported weaker job growth than expected in July and significantly revised the labor market additions reported in June and May.
Federal Reserve Gov. Lisa Cook said the revisions were "concerning" and that officials must follow labor market data more closely over the coming months.
"These revisions are somewhat typical of turning points, which speak to uncertainty," Cook said.
Meanwhile, Atlanta Fed President Rafael Bostic said while the recent labor report raised worries, it wasn't enough for him to change his position that the Fed would only need to cut interest rates once this year.
"Those revisions were quite large, and I think it really reflects some of the churn and the turbulence in the economy," Bostic said. "It really did cause me to think a little differently about how well we're doing relative to our maximum employment mandate."