Fed official offers surprising words about next Fed rate cut

The standard bet on interest rates is that the Federal Reserve will cut them twice this year.

The Fed cut the key federal funds rate in September, cutting it to a range of 4.75% to 5% from 5.25% to 5.5%. This was its first rate cut since 2000 during the Covid-19 pandemic.

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The central bank moved because its 11 rate hikes between the start of 2022 and July 2023 succeeded in curbing inflation but also appeared to slow the domestic economy more than the Fed expected or wanted.

Related: Veteran fund manager makes clear why the popular stock forecast is wrong

But last week’s stronger-than-expected jobs report for September and Thursday’s consumer price index report showing stronger-than-expected inflation threw the conventional wisdom into a bit of a tailspin.

Indeed, a voting member of the Federal Open Market Committee, the Fed’s rate-setting body, said Thursday that he would be happy if the Fed skipped a rate cut at its November meeting.

Federal Reserve Chairman Jerome Powell balances risks to job growth and inflation.

Tom Williams/Getty Images

The Fed’s Raphael Bostic suggests a possible interest rate pause

Raphael Bostic told The Wall Street Journal, “I’m very comfortable skipping a meeting if the data suggests it’s appropriate.”

Bostic, president of the Federal Reserve Bank of Atlanta, made the comment in an interview after the Labor Department reported that the CPI rose 2.4 percent in September over the past 12 months.

Expectations were for 2.3% year-on-year growth.

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Bostic said both the jobs and CPI reports present some “confusion.” That suggested, he told the Journal, “Maybe we should take a break in November.”

One concern is that prices could be pushed up as Floridians begin spending heavily to repair homes, cars and other property damaged by Hurricanes Helene and Milton.

Milton hit the west coast of Florida on Wednesday and crossed the state before heading into the Atlantic Ocean.

Stocks slip after Fed Bostic comments

Bostic, one of the FOMC’s most sought-after members this year, agreed to a 50 basis point (0.5 percentage point) cut at the Fed’s Sept. 17-18 meeting.

One member of the FOMC, Governor Michelle Bowman, cast the only negative vote on the decision. But it became clearer that the vote to cut from 4.75% to 5% was not enthusiastic. Most officials agreed that the federal funds rate should be cut, but many suggested that 25 basis points seemed more appropriate.

Related: Debate rages over how fast to cut interest rates

Bostic’s comments added some selling pressure to the stock market on Thursday. The S&P 500 fell 0.2%, the Nasdaq Composite shed 0.1% and the Dow Jones Industrial Average fell 58 points.

The S&P 500 and Dow closed at record highs on Wednesday.

Rates have increased since September

In fact, the interest rate cut turned out to be a short-term low in interest rates in general.

Freddie Mac’s weekly mortgage rate report released Thursday showed the rate on a 30-year mortgage hit 6.32 percent, up from 6.12 percent a week earlier and up from a low of 6.08% in its September 19 report.

The 10-year Treasury yield was around 4.1% on Thursday. On Sept. 16, the day before the Fed begins its Sept. 17-18 meeting, it was as high as 3.62 percent.

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