Atlanta Federal Reserve President Raphael Bostic said Tuesday that the Federal Reserve should be prepared to consider deeper interest rate cuts if the labor market deteriorates.
Bostic said in his remarks that his business partners still see layoffs as unlikely at this time, although the statement comes at an inopportune time after the release of the ISM manufacturing PMI data, which showed a deterioration in employment expectations in the US manufacturing sector.
Posetic noted that recent PCE data showed that inflation remains on a downward trajectory.
He stressed that he is closely monitoring upcoming jobs data, noting that if job growth slows to less than 100,000 jobs per month, this calls for further scrutiny of the reasons for this slowdown.
Bostic expressed his reluctance to be overconfident on inflation, especially since the core PCE index remains at 2.7%.
Bostic's baseline scenario is for steady easing with inflation expected to continue to slow and the labor market to remain strong.
A Fed member revealed that he is open to another half-percentage-point interest rate cut if unexpected signs of weakness emerge in the labor market.
With these statements, Bostic shows that he is keen to closely monitor developments in the labor market, while being prepared to take additional measures if necessary.
Powell's remarks
Federal Reserve Chairman Jerome Powell said the U.S. economy is poised for further inflation slowdown, moving closer to policymakers' target, paving the way for the Fed to cut interest rates further and gradually reach a neutral level.
The statement came more than a week after the Federal Reserve cut interest rates by half a percentage point, its first cut since 2020, in response to falling inflation.
Lowering interest rates helps lower the cost of borrowing for individuals and businesses, giving households some support ahead of the November presidential election, although the Fed operates independently of political influences.
Speaking at the annual meeting of the National Association for Business Economics in Tennessee, Powell said: “The decline in prices has been broad-based, and recent data indicate continued progress toward achieving the sustainable 2% inflation goal.”
Powell also indicated that further rate cuts could be on the way if no unexpected developments emerge.
Looking ahead, if the economy develops as generally expected, monetary policy will gradually move towards a more neutral stance, he added.
He stressed that policymakers will not commit to a fixed path in advance, but will assess incoming data with an eye to possible further rate cuts.
Powell made it clear that the Federal Reserve could cut interest rates faster if the economy slows more than expected.
He concluded by saying: We are not in a hurry and we do not need to move quickly. It is a process that will take time.
