Fed’s Bostic open to another jumbo rate cut if jobs market unexpectedly weakens

Investing.com — Atlanta Federal Reserve President Raphael Bostic signaled on Monday that he was open to backing another 50 basis point rate cut at the Fed’s November should the labor market show unexpected weakness.

“A surprise to the weak side …. would pull me much further into really needing another dramatic move,” Bostic said in an interview with Reuters.

Recent data showing that its battle with inflation continues to make progress has encouraged the Fed to deepened its outlook on the labor market as the central bank seeks to avoid a spike in unemployment that could derail the economy.

The Atlanta Fed president said he sees the Fed targeting a terminal rate of around 3.00% to 3.25% by the end of the year. That is roughly in line with economists’ expectations, though there is debate on how fast the Fed is likely to reach its targeted benchmark rate, with some betting the terminal rate could be achieved as soon as the summer of next year. 

The remarks come just days ahead of the nonfarm payrolls report for August, with economists forecasting the unemployment rate to remain at 4.2%. 

A negative surprise in the July nonfarm payrolls report had triggered recession fears and led to the Aug. 5 global selloff, but those concerns were tempered by subsequent data underscoring the strength in the economy.  

The Fed’s most recent labor market projection, released at its Sept. meeting, showed Fed members forecasting the unemployment to inch higher to 4.4% by year end. 

The odds, however, continue to lean in favor of down shift to 25 basis point rate cut at the Fed’s November meeting following a 50 basis point at September, according to Investing.com’s