Atlanta Federal Reserve Bank President Raphael Bostic recently stated in an interview with CNBC that he predicts the US central bank will lower the policy rate only once this year. He emphasized that the economy is maintaining strong momentum and any weakening is at a very incremental level.
Bostic mentioned that over the longer arc, the economy does need to slow to reach its longer-run potential but believes growth and inflation can still be achieved while noting that inflation would drop much slower than expected, leading to a need for the Fed to be more patient. In terms of market reaction, the US Dollar Index did not show an immediate response to Bostic’s comments and was slightly down by 0.04% on the day at 104.70.
Despite this, Bostic emphasized that he is not looking to disrupt the economy’s dynamics unless there are signs of degradation in employment. Despite his revised forecast of one rate cut this year, Bostic expressed the importance of watching and waiting to see how things unfold. If the economy evolves as he expects, it would be appropriate to cut rates in the fourth quarter of this year. Bostic predicted that inflation will gradually decrease through 2024 and does not anticipate reaching the 2% inflation target until 2026.
