Atlanta Fed President: Interest Rate Cuts Still Possible Amid Economic Uncertainties
Atlanta Federal Reserve President Raphael Bostic has indicated that interest rate cuts remain a possibility this year as policymakers navigate changing economic conditions and new policies from the Trump administration.
"I am not taking anything off the table, but I am not putting anything extra on the table either," Bostic said in a recent interview.
Despite the Fed's cautious stance and recent hotter-than-expected inflation data, Bostic noted that inflation trends may not follow a linear path down to the Fed's 2% target. He emphasized the importance of assessing data over time to determine whether recent inflation numbers represent a change in trend.
Bostic expressed concerns about the potential inflationary impacts of proposed tariffs, tax cuts, and deregulation measures by the Trump administration. However, he also recognized that these policies may have mixed effects, potentially spurring investment and productivity gains.
The Fed's recent meeting minutes echoed Bostic's cautious stance, indicating concerns about inflation and the potential effects of new government policies. The minutes acknowledged the challenges in distinguishing between persistent and temporary changes in inflation related to new policies.
Bostic also addressed the Fed's balance sheet reduction strategy, suggesting that the central bank is approaching the level where further reductions may have unintended consequences. He emphasized the need for caution in light of uncertainties surrounding the raising of the nation's borrowing limit.
Traders have adjusted their expectations for Fed rate cuts this year, with markets now predicting just one cut later in the year due to the January inflation data. Bostic, however, expressed confidence in the Fed's current policy rate and its ability to bring inflation down.