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  • Fed's Bostic Keeping 'Options Open' for Dec. Rate Decision

Fed's Bostic Keeping 'Options Open' for Dec. Rate Decision

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Bloomberg Dec 3 02:25 · 2693 Views

Federal Reserve Bank of Atlanta President Raphael Bostic said he’s undecided on whether an interest-rate cut is needed this month, but still believes officials should continue lowering rates over the coming months. Bloomberg's Michael McKee has the story.

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Transcript

  • 00:00 Here now
  • 00:00 with some comments from Rafael Bostic.
  • 00:02 So kind of the first of the Fed speak of the week.
  • 00:04 He's first out-of-the-box
  • 00:06 for a very busy week for Fed officials.
  • 00:08 And basically he's saying that inflation is on a path, albeit bumpy,
  • 00:13 to the Fed's 2% target and they just need to keep going in that direction.
  • 00:18 The Fed is tight at this point, he thinks, and they do need to adjust policy downward, but the path
  • 00:25 and how fast that happens
  • 00:27 isn't clear at this point because there are a couple of things on both sides of their mandate to worry about.
  • 00:33 He had Scarlett some interesting examples.
  • 00:35 1 is that the number of jobs created
  • 00:39 by small businesses opening
  • 00:42 has come down,
  • 00:43 and so that suggests that we're losing some steam in the labor markets.
  • 00:49 But
  • 00:49 also the number of jobs openings that were reported in those JOLTS report earlier in the year that were so large.
  • 00:55 He thinks
  • 00:56 that their research shows that maybe those were exaggerated.
  • 00:59 So maybe the labor market is not contributing to inflation as much as they thought.
  • 01:04 So he's going to be following those things.
  • 01:05 He's going to be following the debate
  • 01:07 over
  • 01:08 the data that comes in
  • 01:10 for this week, the jobs report and the
  • 01:12 CPI.
  • 01:13 And then he'll make a decision about December.
  • 01:15 He still hasn't refined his view of how fast they would cut rates next year,
  • 01:20 but he says his
  • 01:21 estimate of the neutral rate is about 3 to 3 1/2 percent.
  • 01:25 OK.
  • 01:25 So he's very much data dependent up until the last minute here
  • 01:29 and trying to parse through the noise.
  • 01:31 How has this affected the pricing of what markets think the Fed will do come December and in 2025?
  • 01:37 Well, markets have basically backed off the idea that there is a certain path.
  • 01:42 The
  • 01:42 markets had priced in
  • 01:44 just before the last meeting,
  • 01:46 100% chance of a rate cut in December.
  • 01:49 That's gone away.
  • 01:50 Now it's about 65%.
  • 01:51 And of course that'll get bounced around by the jobs report and CPI next week.
  • 01:55 It's really 2025 that the markets are very curious about.
  • 01:59 We'll get a new SCP, we'll get a new dot plot on December 18th.
  • 02:04 But those how long will they be valid?
  • 02:07 We asked him today whether
  • 02:09 he's incorporating the Trump
  • 02:11 economic promises into his forecast.
  • 02:13 He says way too early to do that because
  • 02:16 they haven't been fleshed out.
  • 02:17 We don't have the details.
  • 02:18 We don't know exactly how he's going to do.
  • 02:20 And that really echoes what Jay Powell had said during the last FOMC presser when everyone was throwing him questions, hypothetical questions really, about the incoming administration.
  • 02:28 You said that this kicks off a big week of
  • 02:30 Fed speak.
  • 02:31 We know that Jay Powell will be speaking on Wednesday, but around Jay Powell's comments on Wednesday, what else can we anticipate?
  • 02:37 Well, you've got a couple of other Fed officials who are going to be talking about these things, including Tom Barkin
  • 02:42 from
  • 02:43 the Richmond Fed who just added two speeches today.
  • 02:47 Chris Waller is talking later today about the Fed and its
  • 02:51 framework review that begin.
  • 02:53 And there's a lot of questions about that that are
  • 02:56 not immediately impactful in terms of Fed rate cuts, but how the Fed will look at data going through the next years.
  • 03:04 And so there's a lot of things to keep an eye on.
  • 03:07 But Jay Paul, of course, being the premier event of the week for
  • 03:11 Fed speak.
  • 03:12 All right.
  • 03:12 And it'll be a moderated discussion.
  • 03:14 So he's going to be answering questions.
  • 03:15 So there will be a release text as well.
  • 03:18 He
  • 03:19 may have a some
  • 03:21 text remarks, but I suspect if he's going to say anything, it'll be in the Q&A.