Federal Reserve (Fed) Bank of Atlanta President Raphael Bostic recently made remarks indicating that the Fed may need to consider more significant rate cuts if the jobs market in the US deteriorates. Despite this warning, Bostic also mentioned that his business contacts have stated they do not expect any layoffs in the near future. This statement was made in light of recent ISM data showing a concerning decline in employment outlook within the US manufacturing sector.
One of the key points raised by Bostic is the recent Personal Consumption Expenditures (PCE) data, which suggest that disinflation is still a significant concern. This indicates that there is a potential for inflation to remain low or even decrease in the coming months. Additionally, Bostic emphasized the importance of closely monitoring upcoming jobs data, especially if employment growth falls below 100,000 jobs. This could signal a need for closer examination of the factors impacting the labor market.
Furthermore, Bostic expressed caution regarding inflation, pointing out that the core Personal Consumption Expenditures Price Index remains at 2.7%. Despite this, the baseline expectation is for an ‘orderly’ easing, with inflation projected to continue slowing and the job market expected to remain relatively stable. However, Bostic mentioned that he is open to the possibility of another half-percentage point rate cut if unexpected weakness is seen in the labor market.
Overall, Bostic’s comments highlight the Fed’s concerns regarding the US economy, particularly in relation to inflation and the labor market. While there is optimism that the current easing measures will support economic growth, there is also a recognition that additional actions may be necessary if the situation deteriorates. As such, investors and market participants will be closely watching future data releases and Fed statements for guidance on the central bank’s monetary policy decisions in the coming months.
