While the Federal Reserve has repeatedly mentioned it will bring inflation back down to its 2% target, central bank officials aren’t saying that means interest cut can’t come sooner.
Yahoo Finance’s Jennifer Schonberger reports:
Atlanta Fed president Raphael Bostic said Wednesday he believes the central bank cannot wait until inflation hits 2% to begin cutting interest rates — and that while the job market has weakened, it’s not “weak.”
“We must not maintain a restrictive policy stance for too long,” Bostic wrote in an essay ahead of the Fed’s policy meeting in two weeks. “I believe we cannot wait until inflation has actually fallen all the way to 2% to begin removing restriction because that would risk labor market disruptions that could inflict unnecessary pain and suffering.”
Bostic’s comments come ahead of the government jobs report due out Friday, which Fed officials are looking to for direction on the labor market. July’s jobs report clocked in weaker than expected and stirred fears in markets of a recession.
The Atlanta Fed president said the balance of risks has shifted, and he’s giving “basically equal attention” to the job market as he is inflation. And while the job market is cooling, he still views it as “stable.”
Bostic said that while the unemployment rate has ticked up to 4.3%, it’s just above the Fed’s long-run projection of 4.2%. He added that the 12-month moving average of jobs created is still a healthy 209,000 new jobs a month through July 2024. He also noted that while the hiring rate has fallen back to pre-pandemic levels, job openings, though down, remain above pandemic levels.
“I do not sense a looming crash or panic among business contacts,” Bostic wrote. “However, the data and our grassroots feedback describe an economy and labor market losing momentum.”
