(Bloomberg) -- Federal Reserve Bank of Atlanta President Raphael Bostic said the US central bank must balance competing risks as it considers how quickly it will continue to lower interest rates in the coming months.
While risks to inflation have come down, threats to the labor market have risen, though the economy is still strong, Bostic said.
“I’m still laser focused on the inflation target and making sure that we get that to target,” Bostic said Tuesday during a moderated conversation in Atlanta, adding that “because inflation has come down so far, the employment side of the mandate starts to become more salient.”
Fed officials cut borrowing costs by a half percentage point in September, kicking off an easing cycle with a larger-than-anticipated move policymakers said was intended to protect the strong US economy.
Bostic said last month he was open to another half-point cut if the labor market weakened faster than expected, but that officials had “the luxury of being a bit more patient” if the labor market stays strong.
The US economy added 254,000 jobs in September, topping all estimates, and the unemployment rate dipped to 4.1%, according to data released by the Bureau of Labor Statistics last week. The surprisingly positive report takes some pressure off of Fed officials by easing worries about the labor market. Investors have dialed back bets on another large rate cut when officials gather again in November.
Asked about the effects of climate change, Bostic pointed to the higher frequency of hurricanes affecting the southeast US and said the destruction from storms can disrupt supply chains and impact certain marketplaces. Insurance costs are also rising as companies face larger payouts, making home ownership less affordable, he said.
The Atlanta Fed chief also said that as a regulator he wants to make sure banks are prepared to deal with climate-related risks.
“We need to make sure that they are recognizing that the risks to their loan portfolios might be changing in fundamental ways,” Bostic said. “I want the banks to be ready.”
(Updates with additional comments from seventh paragraph.)
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