Federal Reserve Bank of Atlanta President Raphael Bostic has expressed openness to a rate cut in September, emphasizing the need for timely action to ease monetary policy amid signs of a cooling labor market.
R. Bostic's Comments
Raphael Bostic, president of the Federal Reserve Bank of Atlanta and a voting member of the interest rate-setting committee, told the Financial Times that as inflation pressures ease, it is crucial for officials to consider their duty to maintain full employment. “Now that inflation has come into a range, we need to look at the other side of the spectrum, and there we have seen the unemployment rate rise significantly from low levels,” Bostic said. “But it does make me think about what the appropriate timing is, and so I am open to something happening in terms of us taking action before the fourth quarter.”
Risks and Urgency of Action
Bostic said the risks are high for the Fed as it considers when and how quickly to ease policy. “Waiting brings risk, and that’s why we have to be extra careful,” he said. “Because our policies move in both directions with a lag, we can’t afford to be late. We have to act as soon as possible.”
State of the Labor Market
On Wednesday, Bostic described the labor market as “weakening but not weak,” noting that businesses in the southern U.S. are pausing to hire rather than laying off workers. Asked whether the Fed would consider cutting interest rates by half-point rather than quarter-point if the labor market weakens faster than expected, Bostic said “everything is on the table.” “If we see a deterioration that suggests labor markets are going to collapse or could collapse, I would be very supportive of moving more assertively to minimize the amount of that pain,” he added, but clarified that that is not the current outlook.
Raphael Bostic’s comments support market expectations that the Federal Reserve could begin cutting interest rates in September 2023 for the first time since the start of the Covid-19 pandemic. This decision will be closely monitored by economists and business representatives.
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