Fed’s Bostic Open to Additional Jumbo Rate Cut if Job Market Weakens Unexpectedly

On Monday, Atlanta Federal Reserve President Raphael Bostic expressed his willingness to consider a 50 basis point rate cut during the Fed’s upcoming meeting in November, contingent on any unexpected weakness in the labor market.

“In the event of a surprising downturn, I would be inclined to support a significant move,” Bostic stated in an interview with Reuters.

Recent data indicating progress in the fight against inflation has prompted the Federal Reserve to reassess its outlook on the labor market as it strives to prevent a surge in unemployment that could harm the economy.

Bostic anticipates that the Fed will target a terminal rate between 3.00% and 3.25% by the end of the year. This aligns closely with the expectations of economists, although there is ongoing debate regarding how quickly the Fed will reach its desired benchmark rate. Some experts predict that the terminal rate could be achieved as early as the summer of next year.

These comments come just ahead of the nonfarm payrolls report for August, with economists estimating that the unemployment rate will hold steady at 4.2%.

A disappointing July nonfarm payrolls report had sparked recession fears and contributed to a global selloff on August 5; however, subsequent data has tempered those concerns and highlighted the economy’s strength.

The Fed’s latest labor market forecast, released during its September meeting, indicated that members expect the unemployment rate to rise slightly to 4.4% by the end of the year.

Nonetheless, the prevailing outlook suggests a potential shift to a 25 basis point rate cut at the Fed’s November meeting, following a 50 basis point reduction in September.