Atlanta Federal Reserve Bank President Raphael Bostic believes that the US central bank should only lower the policy rate once this year in an interview with CNBC on Wednesday. Despite maintaining strong momentum, he notes that there may be some incremental weakening in the economy. Bostic believes that the economy needs to slow down in order to reach its longer-run potential, but he still expects growth and inflation to continue, albeit at a slower pace than anticipated.
Bostic emphasizes the need for patience as inflation is likely to decrease at a slower rate than expected. He has adjusted his forecast to include only one rate cut this year, with a potential cut in the fourth quarter if the economy evolves as he expects. Bostic projects that inflation will decrease gradually through 2024 and may not reach the 2% target until 2026.
While there may be bumps in the road ahead, Bostic is not eager to disrupt the economy’s dynamics as long as inflation is moving towards the target rate. He mentioned that any degradation in employment would need to be taken into consideration, but his contacts have not expressed concerns about employment.
The market did not show an immediate reaction to Bostic’s comments, with the US Dollar Index losing only 0.04% on the day at 104.70. Overall, Bostic’s cautious outlook and forecast for a single rate cut this year suggest a measured approach to monetary policy in response to the changing economic landscape.
