Atlanta Fed President: The Fed will definitely cut interest rates this year, but the timing is still uncertain

Atlanta Fed President Bostic said in an interview with Reuters that the Fed may still cut interest rates this year even if the timing and extent of policy easing are uncertain and inflation is slow to fall further.

Atlanta Fed President Bostic said in an interview with Reuters that the Fed may still cut interest rates this year even if the timing and extent of policy easing are uncertain and inflation is slow to fall further.
In his first public comments since the Fed\’s policy meeting, Bostic said \”I continue to believe\” interest rates can be lowered this year even if prices rise in the first quarter at a pace that appears to be well above the Fed\’s 2% target.
He said conversations with companies in his jurisdiction indicated that wage and job growth may be slowing; and that most companies believe their pricing power is declining after rapid price increases in 2022 push inflation to a 40-year high.
\”Most employers expect their wage growth to return to pre-pandemic levels,\” Bostic said in an interview on Thursday (9th).
\”With the exception of technology companies,\” almost everyone said their pricing power has reached its limits.
He said this should set the stage for further progress in inflation this year and for the Fed to eventually begin easing monetary policy.
But this may take a while.
Bostic noted that while U.S. job growth in April was weaker than expected, the gain of 175,000 jobs was still a strong number that would need to fall further before he felt it was consistent with the Fed\’s inflation target.
\”We won\’t know that for at least the next few months,\” he said.
\”I hope to continue to see this slowdown because the outlook does suggest that in order to get inflation back to the 2% target we are going to have to see some slowdown but still strong employment growth.\”
Bostic is a voting member of the Federal Open Market Committee (FOMC), the central bank\’s policy-setting committee this year; he last week supported stabilizing the benchmark interest rate again within the 5.25-5.50% range set in July.
Bostic said he still thinks only 25 basis points of rate cuts are likely before the end of the year and that the focus is now less on how much the policy rate might fall by 2024 and more on determining the right timing for a rate cut.
\”We have to be patient and wait for inflation to signal that inflation will move more strongly towards 2%,\” he said.
\”This will take some time.\”
The primary question for me is when it will happen rather than how much it will cut this year.
\”Federal Reserve officials and investors have decided to postpone the timing of interest rate cuts this year.
Rate cuts were originally scheduled to begin as early as March but are now not expected to begin until September.
Fed officials will update their economic and interest rate outlook at their June 11-12 meeting.
Bostic expects inflation to return to 2% in late 2025 or early 2026, slowly returning to the price stability level set by the Fed. He believes this will allow the Fed to avoid a sharp rise in unemployment.
The personal consumption expenditures (PCE) price index, the Fed\’s preferred inflation gauge, rose at an annual rate of 2.7% in March.
The question now is how much further inflation needs to cool and how quickly.
Bostic said he was an \”optimist\” who believed price pressures would ease even if policy rates \”need to stay higher for longer and it\’s going to be a bumpy ride.\”

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