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Federal Reserve Bank of Atlanta President Raphael Bostic said he opposed last week’s interest rate cut because two earlier reductions had provided insurance against global risks and the central bank needed to preserve its ammunition.
“We had already done a fair amount of accommodation -- we had moved twice already -- and it was my view we should just let that go and wait and see how it plays out,” Bostic said Friday in a Bloomberg Television interview.
Fed officials last week cut interest rates by a quarter-percentage point for a third time this year, to 1.5%-1.75%, the first reductions since the financial crisis. They cited the combination of trade-policy uncertainty, slowing global growth and below-target inflation as rationales for the cuts, which partially unwound more than 2 percentage points of increases from December 2015 to December 2018.
“I worry a lot about the policy space we have,” Bostic said. “When you think historically what the responses have been to a recession, we don’t have that much space. I want to make sure when we do deploy our tools, they are deployed to maximum effect.”
Bostic said he would be comfortable with maintaining rates at the current level for an indefinite period. Fed Chairman Jerome Powell told a press conference last week it would take “a material reassessment” of the outlook for policy makers to adjust rates again.
The Atlanta Fed leader cited advice from his board of directors in his view that he probably would have dissented against the rate cut.
“I’d be open to increases or decreases” as needed, Bostic told reporters Thursday evening after a speech in New York. “Right now I think that the change in the economy that would need to happen for me to feel like we were running too hot would be significant.” But for him to feel the need for another cut, the change in the outlook he would need to see, “that’s going to be significant as well.”
Extending the economic expansion is especially important to people who have been left behind in the economy, Bostic told Bloomberg Television Friday.
Wages are rising for lower-income workers and a tight job market is creating opportunities for hard-to-employ laborers, such as former inmates, he said, citing the Atlanta Fed’s Wage Tracker as showing gains for job switchers as one indication of tightness.
--With assistance from Matthew Boesler.
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