Stocks recover after tough start to September

Although the Federal Reserve has repeatedly said it will bring inflation back to its 2% target, central bank officials are not saying that means interest rate cuts cannot come sooner.

Yahoo Finance’s Jennifer Schonberger reports:

Atlanta Fed President Raphael Bostic said Wednesday he believes the central bank can’t wait for inflation to hit 2% to start cutting interest rates — and that while the labor market has weakened, it’s not “weak.”

“We should not maintain restrictive policy 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 to 2% to begin lifting restrictions, because that risks disrupting the labor market and inflicting unnecessary pain.”

Bostic’s comments come ahead of the government’s employment report on Friday, which Fed officials are looking to see for insights into the labor market. The July jobs report came in weaker than expected and sparked recession fears in markets.

The Atlanta Fed president said the balance of risks has shifted and he is paying “virtually the same attention” to the jobs market as he does to inflation. And even though the jobs market is cooling, he still considers it “stable.”

Bostic said that while the unemployment rate has risen to 4.3%, it is just above the Fed’s long-term projection of 4.2%. He added that the 12-month moving average of jobs created is still 209,000 new jobs per month through July 2024. He also noted that while the hiring rate has fallen back to pre-pandemic levels, job openings, while down, remain above pandemic levels.

“I don’t sense a crash or panic among business contacts,” Bostic wrote. “However, the data and our feedback from the field describe an economy and a labor market that are losing momentum.”