Fed policymakers are cautious: more data needed before rate cut, to ensure no forced rate hikes after the first cut

In 2024, FOMC voter and Atlanta Fed President Bostic stated that he needs to see "more data" to support a rate cut, emphasizing his desire to ensure that the Fed does not have to change course after starting to cut rates.

"We want to be absolutely sure," Bostic said on Tuesday at a conference for African American finance professionals in Atlanta. "It would be very bad if we started cutting rates and then had to raise them again."

If the economy evolves as he expects, rates will be lower by the end of this year. Bostic said, "I'm willing to wait, but it's coming... it's coming."

He reiterated his stance held since March that he may be ready to cut rates "before the end of the year," but he acknowledged that recent inflation data has been encouraging. Bostic's comments came after labor market data came in below expectations, raising concerns about whether the Fed had waited too long to start cutting rates.

The July jobs report showed a significant slowdown in hiring, with the unemployment rate rising to its highest level in nearly three years. According to the futures market, investors believe there is more than a 50% chance of a 50 basis point rate cut in September.

Bostic noted that he is "indeed concerned" about the rise in the unemployment rate, but he added that this increase is largely due to an increase in the labor supply rather than a decrease in demand. Bostic stated that this is a "good thing."

Bostic now joins several other Fed policymakers who oppose the view that more proactive action should be taken to varying degrees. They oppose the view that the economy is heading downhill, but also warn that the Fed needs to cut rates to avoid this outcome.

Bostic's comments about cutting rates later this year are not as clear as his comments in June about the timing of the first rate cut. At that time, he said he expected a 25 basis point cut in the fourth quarter. With risks between inflation and employment gradually balancing, Bostic stated that while the job market remains strong, the Fed wants to ensure that the hot job market does not suddenly turn "cold."

Nervous investors will turn their attention to the Fed's annual symposium in Jackson Hole, Wyoming next week. Although the agenda for the meeting has not been announced, it is widely expected that Fed Chair Powell will deliver a speech and may provide more guidance on expectations for the mid-September FOMC meeting