Atlanta Fed president Raphael Bostic said Wednesday he believes the central bank cannot wait until inflation hits 2% to begin cutting interest rates — and that while the job market has weakened, it’s not “weak.”
“We must not maintain a restrictive policy stance for too long,” Bostic wrote in an essay ahead of the Fed’s policy meeting in two weeks. “I believe we cannot wait until inflation has actually fallen all the way to 2% to begin removing restriction because that would risk labor market disruptions that could inflict unnecessary pain and suffering.”
Bostic’s comments come ahead of the government jobs report due out Friday, which Fed officials are looking to for direction on the labor market. July’s jobs report clocked in weaker than expected and stirred fears in markets of a recession.
Economists expect the job market to have rebounded in August with expectations for 165,000 jobs created. That would be up from 114,000 jobs created in July. Both figures are still below the average monthly gain of 215,000 jobs created over the prior 12 months.
The unemployment rate is expected to tick down to 4.2% from 4.3% in July — a level that triggered a recession signal.
Right now, traders have priced in roughly 50-50 odds the Fed will cut by a quarter percentage point or half a percentage point. A much weaker jobs report on Friday would tip the scale toward a half-point cut.