Fed Officials, Worried About Jobs, Muse On Rate-Cut Prospects

• Several Federal Reserve officials said labour market worries continue to animate their belief that rate cuts still lie ahead for the central bank. “I've been clear that I think we should be cutting at the next meeting,” Federal Reserve Governor Christopher Waller explained that “You want to get ahead of having the labour market go down because usually when the labour market turns bad, it turns bad fast," he said.
• Atlanta Fed President Raphael Bostic also reiterated his view that a rate cut is in the cards although he did not say how soon it might happen. He added, "While price stability remains the primary concern, the labour market is slowing enough that some easing in policy, probably on the order of 25 basis points, will be appropriate over the remainder of this year."
• Minneapolis Fed leader Neel Kashkari said with the neutral fed funds rate around 3%, “that suggests that interest rates have some room to come down gently over the next couple of years." The official also declined to say when he believes the Fed should cut rates, given the uncertainties created by trade policy.
• The Fed’s meeting later this month is viewed by investors as a lock for a quarter percentage point cut in what is now a 4.25% to 4.5% federal funds interest rate target range. The market’s confidence is rooted in comments made by Fed Chair Jerome Powell late last monthat the Kansas City Fed’s Jackson Hole, Wyoming research conference when he said, “with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.”
• In weighing a rate cut, Fed officials are trying to balance their legally mandated mission of keeping inflation low and the job market as strong as it can be without creating price pressures. At the same time, a wide range of data indicates the labour market is weakening, and that is driving some at the Fed to focus more on the jobs side of their mandate.
• The officials’ worry about the labour market was to some degree backed up by a government report released on Wednesday that showed moderate hiring and a declining number of job openings. The Job Openings and Labour Turnover Survey, or JOLTS report, showed openings dropped 176,000 to 7.181 million by the last day of July, a lower rate than economists had expected.

(Source: Reuters)