Observers expect the Federal Reserve to reach three Interest rate cuts This year, which many predict will begin in June – but Federal Reserve Bank of Atlanta President Raphael Bostic has some Doubt around these cuts. According to Bostic, Bostic now expects only one rate cut this year Comments he made to reporters on Friday.
“The economy continues to deliver surprises and it continues to be more resilient and energized than I had forecast or predicted,” Bostic said Bloomberg. “And as a result of that, I’ve kind of recalibrated myself as to when I think it’s appropriate to move.”
Fed Chairman Jerome Powell did not do that committed um actually Lowering interest rates This year, he said it was too early for that at this point and that the Fed was still keeping an eye on key metrics like inflation and unemployment when making its decision.
Bostic also says it’s too early to tell, calling the decision to cut interest rates a “close call.”
“We’ll have to see how the data comes in over the next few weeks,” Bostic said.
In particular, he says, the inflation data is not quite on track as he would have hoped. In February, annual inflation was 3.2%, well above the elusive 2% average that the Fed sets as its target. Even more worrying was the fact that there was a slight increase compared to January’s inflation rate of 3.1%.
Bostic described these developments as “worrying”.
Bostic has been cautious in predicting interest rate cuts more than once. Earlier this month, he said the Fed had “no urgency” at lower rates. He also said that multiple rate cuts would not involve consecutive Fed meetings. Now that point is moot considering he only forecasts a single cut in 2024. Last May, Bostic predicted interest rate cuts wouldn’t happen at all in 2023Despite some rumors that it was a possibility, it also turned out to be true.
Last month Powell said He said it was still too early to determine whether inflation had been sufficiently contained and he said he wanted to “see more good data” before committing to a rate cut.
Bostic isn’t entirely sure whether inflation will continue to move in the downward direction the Fed is hoping for. “I’m definitely less confident than I was in December,” he said.
The economy’s resilience, Bostic says, underpins his forecast and buys the Fed some time before it has to make a decision on when to cut interest rates. Since the economy is doing well, “that gives us room to be patient,” he said. “And we should just be patient.”
American consumers remain happy to spend at the start of the year. Retail spending rose by 0.6% in February. In total Consumer spending increased a full percentage point in February after a slight decline in January.
The Unemployment rate, which was pleasingly low, also rose slightly. In February it was 3.9%. However, this number is still considered low for a period when the Fed is focused on reducing inflation. When inflation tends to fall, unemployment is usually expected to rise. So a slight increase, especially considering how Historically low unemployment remained during the sharp decline in inflation from June 2022 to June 2023 is considered good.
“If we have an economy that is growing above potential, and we have an economy in which unemployment is reaching levels that were considered unimaginable without price pressures, and if we have an economy in which inflation is moderating… these are good things,” Bostic said.