Although the recent US labor market has shown a clear downward trend, there are many signs of weakness in the economy and inflation has also continued to cool as expected. However, like other Fed policymakers, Bostic expressed caution about the next steps and hopes to avoid cutting interest rates too early and causing a sharp turn in interest rate policy.
On Tuesday, Raphael Bostic, the president of the Atlanta Fed and a member of the Fed's policy-setting committee this year, said that more data was still needed and the Fed could cut interest rates before the end of the year. Before supporting a rate cut, he needed to see more data and emphasized that he hoped to ensure that the Fed would not change course after starting to cut interest rates. "We want absolute certainty. It would be very bad if we started cutting rates and then had to raise them again."
Bostic reiterated his stance since March, saying he might be ready to cut interest rates by the end of this year. Bostic joined other Fed officials who are at varying degrees against taking more aggressive action in monetary policy. Currently, the market is more aggressive in its expectations of a Fed rate cut. According to the futures market, investors believe there is more than a 50 percent chance of a 50 basis point cut in September.
Bostic also acknowledged that he was encouraged by the recent inflation data. Data released on Tuesday showed that U.S. PPI in July fell well below expectations, with a year-on-year increase narrowing to 2.2 percent and service costs falling for the first time this year. The market will closely watch the heavyweight CPI data released on Wednesday for more signals on inflation cooling.
Recently, multiple labor market data in the United States have been weaker than expected, prompting concerns about whether the Fed is waiting too long to start cutting interest rates. Bostic said he was indeed worried about the rise in the unemployment rate, but he added that the increase in the unemployment rate was largely due to an increase in labor supply rather than a decrease in demand. This is a good thing.
Although the recent US labor market has shown a clear downward trend, there are many signs of weakness in the economy and inflation has also continued to cool as expected. However, like other Fed policymakers, Bostic expressed caution about the next steps and hopes to avoid cutting interest rates too early and causing a sharp turn in interest rate policy.
Investors will turn their attention to the global central bank conference in Jackson Hole, Wyoming next week. Although the agenda for the meeting has not yet been released, Federal Reserve Chairman Jerome Powell is expected to speak and may provide more clues about the Fed's September meeting.
Editor/Somer