Fed’s Bostic: Could see another jumbo cut if labor market deteriorates

Federal Reserve (Fed) Bank of Atlanta President Raphael Bostic noted on Tuesday that the Fed should be willing to explore more outsized rate cuts if the jobs market deteriorates. The Fed’s Bostic also assured markets that his business contacts continue to say they do not expect layoffs, a poorly timed soundbite that comes on the back of ISM data early Tuesday showing a deterioration of the employment outlook within the US manufacturing space.

Key highlights

Recent PCE data show disinflation still on track.

Business contacts continue to say they do not expect layoffs.

Will be watching upcoming jobs data closely.

If employment growth slows much below 100K jobs, would warrant closer questioning of what is happening.

Does not want to get overconfident on inflation given core Personal Consumption Expenditures Price Index remains 2.7%.

Baseline case is for an ‘orderly’ easing with inflation expected to continue slowing and job market to hold up.

Bostic is open to another half-percentage point rate cut if labor market shows unexpected weakness.