(Bloomberg) -- Federal Reserve Bank of Atlanta President Raphael Bostic said the central bank’s two mandates — stable prices and maximum employment — are now in balance for the first time since 2021, though he added he is “not quite prepared” to declare victory over inflation.
“Though they have declined significantly, risks to meeting our price stability mandate remain,” Bostic said in an essay released Wednesday by the Atlanta Fed. “We must stay vigilant to ensure those risks continue to wane.”
“History shouts to us that loosening monetary policy prematurely is a dangerous gambit that can rekindle inflation and entrench it in the economy for many months or even years,” he said.
Bostic is a voting member of the Federal Open Market Committee this year. His remarks didn’t make clear whether he would go along with a widely anticipated quarter-point cut to interest rates when officials next meet Sept. 17-18.
While continuing to sound a cautious note, the Atlanta Fed president also pointed to significant progress made in reducing inflation.
“Price pressures are diminishing quickly and broadly,” he said. “The most recent monthly reports bolster my confidence that inflation is likely on a sustainable path to the committee’s 2% objective.”
He also acknowledged the risk to the labor market should the central bank wait for inflation to return all the way back to 2% before reducing the restrictiveness of its policy.
In examining both labor market data and anecdotal information, Bostic said he sees a “loosening but still broadly stable” jobs market.
“The labor market continues to weaken, but it is not weak,” he said.
Data out Wednesday pointed to a further weakening in employers’ demand for workers, as US job openings declined in July to the lowest level since January 2021. Layoffs also edged higher.
Less pressure to compete for workers has also cooled off wage increases, removing some of the impulse among businesses, especially in services, to raise prices to cover labor costs. More broadly, he said, pricing power among businesses appears to be fading.
“Rest assured, I do not sense a looming crash or panic among business contacts,” Bostic said. “However, the data and our grassroots feedback describe an economy and labor market losing momentum.”
The Atlanta Fed chief has repeatedly warned of the risk of rekindling inflation if the central bank moves too early to lower rates. In remarks last week, Bostic said cooling price pressures had caused him to move forward his timeline for cutting rates, but inflation was “still far” from the Fed’s 2% target.
(Updates with additional Bostic comments from fifth paragraph.)
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