Fed's Bostic Warns Against Keeping Policy Restrictive For Too Long

(RTTNews) - Atlanta Fed President Raphael Bostic cautioned against maintaining a restrictive policy stance for too long as that could cause labor market disruptions and said he was not yet ready to declare victory over inflation.

"…we must not maintain a restrictive policy stance for too long," Bostic said in his quarterly message on Wednesday.

"I believe we cannot wait until inflation has actually fallen all the way to 2 percent to begin removing restriction because that would risk labor market disruptions that could inflict unnecessary pain and suffering."

The Fed is widely expected to lower interest rates, possibly by 25 basis points, in the September 17-18 policy session after a clear signal from Fed Chair Jerome Powell in August.

As inflation has shown signs of easing back to the 2 percent target, focus is now on the developments in the labor market.

"Right now, I think we are in a generally favorable position," Bostic said. "The labor market is still stable and we're moving ever closer to the Committee's price stability objective."

Bostic said he has refocused his attention on the dual mandate of price stability and maximum employment, for the first time since 2021.

The policymaker noted that other indicators suggest a broad slowing of the U.S. economy, but no impending collapse. He also said that the recent monthly data bolster his confidence that inflation is likely on a sustainable path to the FOMC's 2 percent objective.

Though inflationary pressures have declined significantly, risks to meeting the price stability mandate remain and policymakers must stay vigilant to ensure those risks continue to wane, Bostic said.