Unlock the US Election Countdown newsletter for free
The stories that matter on money and politics in the race for the White House
A top Federal Reserve official has said he is “open” to an interest rate cut in September as he warned that the US central bank can’t “afford to be late” to ease monetary policy amid signs of cooling in the labour market.
Atlanta Fed president Raphael Bostic, a voting member of the central bank’s rate-setting committee, told the Financial Times that as price pressures eased officials also needed to be conscious of their mandate of maintaining full employment.
“Now that inflation is coming into range, we have to look at the other side of the mandate, and there, we’ve seen the unemployment rate rise considerably off of its lows,” Bostic said.
“But it does have me thinking about what the appropriate timing is, and so I’m open to something happening in terms of us moving before the fourth quarter.”
Bostic acknowledged the high stakes for the Fed as it weighed when and how quickly to ease monetary policy.
“Waiting does bring risk, and that’s why we have to be extra vigilant on this,” he said. “Because our policies act with a lag in both directions, we can’t really afford to be late. We have to act as soon as possible.”
The comments from the Atlanta Fed chief will further bolster market expectations that the central bank will begin cutting rates in September for the first time since the Covid-19 pandemic ravaged the US economy in 2020.
On Thursday, strong US retail sales data and healthy results from Walmart damped expectations that the Fed will need to deliver a larger half-point reduction when it next meets, as traders in federal funds futures markets scaled back their bets on how quickly the central bank would ease monetary policy.
The Fed next meets in mid-September, six weeks before November’s presidential election and then again shortly after the vote, before a final meeting in December.
A cut to borrowing costs ahead of the election would be welcomed by the White House but politically controversial, with Republican candidate Donald Trump last month warning the Fed not to cut rates.
Bostic had previously supported a rate cut towards the end of the year, warning that the Fed needed to be “absolutely sure” about its grip on inflation before easing borrowing costs.
Bostic’s shift in stance came after inflation data for July showed annual consumer price growth slipped below 3 per cent for the first time since March 2021 — a sharp drop from the peak above 9 per cent notched in June 2022.
“We’ve been saying for a long time that we want to see the numbers come in to give us more confidence that we’re sustainably on the path to 2 per cent and I have to say, the numbers that have come in in the last several months have given me greater confidence that we’re sustainably on that path,” Bostic told the FT.
The consumer price index report released on Wednesday was a “very, very positive sign”, he added.
The Fed has held interest rates at a 23-year high of 5.25-5.5 per cent for more than a year as it battles to tame inflation. While the labour market has remained strong, there are signs that its resilience is fraying.
Monthly jobs growth slowed further in July as the unemployment rate rose for a fourth-straight month to 4.3 per cent, fanning fears of a recession in the world’s biggest economy.
Bostic on Wednesday characterised the labour market as “weakening but not weak” and said the businesses he speaks to across the US south were pausing hiring rather than firing workers.
Asked whether the Fed should consider cutting rates by increments of half a point, not just a quarter point, if the labour market weakens faster than expected, Bostic said “everything is on the table”.
“If we see that there is disruption that’s happening that suggests that labour markets are going to collapse — or might [collapse] — I would very much support moving more assertively to minimise the amount of that pain,” he added, although he said this was not his outlook.
Content Disclaimer and Copyright Notice
Content Disclaimer
The content provided on this website is sourced from various RSS feeds and other publicly available sources. We strive to ensure the accuracy and reliability of the information, and we always provide source links to the original content. However, we are not responsible for the content’s accuracy or any changes made to the original sources after the information is aggregated on our site.
Fair Use and Copyright Notice
This website may contain copyrighted material, the use of which has not always been specifically authorized by the copyright owner. We believe this constitutes a “fair use” of any such copyrighted material as provided for in section 107 of the US Copyright Law.
In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.
