The latest U.S. jobs numbers are another sign the economy is beginning to slow and if this continues, the Federal Reserve may cut interest rates by a quarter of a point at its next policy meeting, Atlanta Fed President Raphael Bostic said. on Friday.
“Today I would be comfortable with either 50 or 25 (base point increase). If I start to hear signs that the job market is easing a bit in terms of its tightness, then I may lean more towards the 25 basis point position,” Bostic told CNBC.
The economy maintained a strong pace of job growth in December, government data showed earlier on Friday, with the jobless rate falling to 3.5%, but moderation in wage growth encouraged investors as the Fed aims to lower high inflation, without triggering mass layoffs.
Bostic said the data hadn’t changed his outlook, reiterating that the central bank needs to keep raising rates and keep them at those peaks “well” into 2024 in his forecast to tame inflation, which is well above the 2% mark. -The Fed’s target remains .
“I’ve been waiting for the economy to steadily slow down from the strong position it had over the summer,” Bostic said. “This is just a next step in that … it’s incremental … so we have to stay the course, inflation is too high, we have to reduce these imbalances.”
He also warned against placing too much emphasis on the pace of wage growth, saying they “do not drive the momentum” of inflation but still need to be carefully monitored.
Fed officials, which last year raised borrowing costs by the highest rate in 40 years to slow the pace of rate hikes, are looking for a break in its current tightening cycle this spring.
Their median forecast puts interest rates at around 5.1%. The Fed’s main interest rate is currently in a target range of 4.25% to 4.50%. In his interview, Bostic said he sees interest rates between 5.00% and 5.25%.
Futures traders tied to Federal Reserve interest rates priced in a greater likelihood that the Fed would hike rates by a quarter of a percentage point rather than half a percentage point at the end of its next monetary policy meeting on Feb. 1 following unemployment data.
Bostic said he doesn’t see a recession this year and said he sees the unemployment rate rising to just 4% by the end of the year, lower than many of his rate-setting peers.
Source: Reuters (reported by Lindsay Dunsmuir; edited by Jon Boyle and Chizu Nomiyama)
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