Fed’s Bostic is open to another major rate cut if the labor market unexpectedly weakens. By Investing.com

Investing.com – Atlanta Federal Reserve President Raphael Bostic indicated Monday he was open to another 50 basis point Fed rate cut in November if the labor market shows unexpected weakness.

“A surprise for the weak side… would take me much further in the fact that I really need another dramatic step,” Bostic said in an interview with Reuters.

Recent data showing continued progress in the fight against inflation has prompted the Fed to deepen its outlook on the labor market as the central bank seeks to avoid a spike in unemployment that could derail the economy.

The president of the Atlanta Fed said he expects the Fed to target a terminal interest rate of about 3.00% to 3.25% by the end of the year. That’s roughly in line with economists’ expectations, although there is debate over how quickly the Fed is likely to reach its target benchmark rate, with some betting the target rate could be reached as early as the summer of next year.

The comments come just days before the August nonfarm payrolls report, with economists predicting the unemployment rate will remain at 4.2%.

A negative surprise in the July nonfarm payrolls report had sparked recession fears and led to the global sell-off on Aug. 5, but those concerns were tempered by subsequent data that underscored the strength of the economy.

The Fed’s latest labor market projection, released at its September meeting, showed that Fed members forecast unemployment would edge back up to 4.4% by the end of the year.