In a recent interview with Yahoo Finance’s Jennifer Schonberger, Federal Reserve Bank of Atlanta President Raphael Bostic shared his insights on the potential for interest rate cuts, the evolving labor market, and the broader economic outlook.
Speaking during the Kansas City Fed’s Jackson Hole Economic Policy Symposium, Bostic provided a detailed explanation of the factors influencing his stance on monetary policy, particularly in light of recent economic data.
Bostic began by addressing the possibility of a 25 basis point interest rate cut at the Fed’s September meeting. While he acknowledged that the idea is on the table, he emphasized that it is “not a done deal.” Bostic explained that his approach to monetary policy is heavily data-dependent, and he is cautious about making premature decisions given the potential for surprises in economic data.
He noted that earlier in the year, he had anticipated a single rate cut in the fourth quarter, but the faster-than-expected decline in inflation and the weakening of labor markets have led him to consider moving this cut forward to the third quarter.
As the conversation shifted to the labor market, Bostic highlighted the importance of monitoring employment trends as a key indicator for future policy decisions. He acknowledged that while the unemployment rate has drifted higher, much of this increase is due to more people joining the labor force, which he views as a positive sign.
However, Bostic also noted that businesses are not as eager to hire as they were a year ago, though they do not foresee mass layoffs. This situation, according to Bostic, creates a delicate balance that the Fed must manage carefully.
When asked about the likelihood of a recession, Bostic remained optimistic, stating that a recession is not in his current outlook. He emphasized that the U.S. economy still has enough momentum to continue growing, despite the challenges posed by inflation and labor market fluctuations.
Bostic pointed out that while the labor market is cooling, it is not in a state of significant weakness, which supports his belief that the economy can avoid a recession.
Bostic also discussed the ongoing efforts to bring inflation back to the Fed’s 2% target. He expressed confidence that the current trajectory of inflation, combined with the moderation in labor markets, supports a gradual path toward normalization. Bostic suggested that the Fed could achieve its inflation target by 2025, with monetary policy adjustments made in line with this goal.
He also touched on the housing market, noting that as interest rates start to come down, it could unlock more inventory and improve the supply situation for American homeowners.
In the latter part of the interview, Bostic addressed the importance of central bank independence, particularly in the context of recent comments by former President Trump regarding the role of the president in setting monetary policy. Bostic reaffirmed the Fed’s commitment to making decisions based on long-term economic stability rather than political considerations. He emphasized that the Fed’s history of acting in the best interest of the U.S. economy has contributed to the nation’s resilience and high quality of life.
