Atlanta Fed President Raphael Bostic Still Considers Rate Cuts in 2025

Atlanta Federal Reserve President Raphael Bostic maintains that interest rate cuts remain a possibility in 2025, subject to the evolving economic landscape and Trump administration policies.

"I am not taking anything off the table," Bostic asserted in a recent interview.

The Fed paused rate increases at its January meeting after a series of cuts in 2024. However, a higher-than-expected inflation reading in January prompted the Fed to adopt a more cautious stance, suggesting it is likely to maintain rates for the foreseeable future.

Bostic acknowledged that inflation is not expected to decline linearly to the Fed's target of 2%. He emphasized the need to assess whether the recent inflation data represents a sustained trend or a temporary blip.

Markets have revised their expectations, anticipating only one rate cut late in 2025 instead of the previously predicted two cuts.

Despite concerns that the Fed may have eased too aggressively, Bostic believes the current restrictive monetary stance is necessary. He also expressed confidence that the Fed's policy rate is sufficient to lower inflation.

The Trump administration's proposed tariffs, tax cuts, and deregulation measures are being closely scrutinized by the Fed. Bostic noted the potential inflationary impact of these policies but also acknowledged their ability to stimulate investment and productivity.

He highlighted the importance of evaluating the impact of tariffs on consumers who are increasingly intolerant of inflation. Bostic cautioned that businesses face uncertainty in absorbing rising costs, as consumers have limited purchasing power.

The Fed's cautious stance was reflected in the minutes of its last meeting, expressing concerns about inflation and potential policy changes under the new administration.

Bostic acknowledged the possibility of the Fed remaining on hold all year due to the uncertainties surrounding new policies. He also addressed the Fed's balance sheet reduction program, suggesting it may be approaching a desirable level.

The Atlanta Fed President emphasized the need for caution in the current environment, as the Fed navigates the complexities of macroeconomic developments and the potential impact of Trump administration policies.