Fed not likely to begin cutting rates in July, says Atlanta President Bostic

Raphael Bostic, the Atlanta Federal Reserve President, said Thursday that U.S. central bankers are unlikely to cut interest rates in July, citing slowed progress on inflation.

“I'm keeping my eyes on the short-run trajectory, and if we can continue to see that trajectory move forward, I think we will be in a good place,” Bostic told Fox Business when asked if the Fed might ease rates in July.

“I don't think that's going to be in July,” he added.

The Atlanta Fed President stressed the need for economic data showing the economy is "sufficiently strong" and inflation has moved closer to the Fed's 2% target before supporting any rate reductions.

"That's not my outlook today,” Bostic noted.

However, Bostic, a voting member of the 12-person Federal Open Market Committee this year, claimed he would not wait for inflation to hit 2% before loosening monetary policy.

“That would really cause inflation to overshoot, and that wouldn't be ideal," he said. The Fed official expects inflation to decrease "very slowly" throughout the year, potentially reaching 2% by 2025 or later.

In their May meeting, officials voted to hold interest rates steady at 5.25% to 5.5%, the highest level since 2001. While they left the possibility of rate cuts later this year open, policymakers emphasized the need for "greater confidence" that inflation is decreasing before easing policy.

Recent data shows some signs of easing inflation. The April consumer price index indicated a slight cooling to 3.4%, down from 3.5% the previous month, easing investor fears of rising prices.

However, minutes from the May meeting revealed that officials are prepared to keep rates elevated longer after disappointing inflation readings in early 2024 and are willing to hike rates again if necessary.

Bostic said that he does not foresee raising rates again this year unless there is evidence of increasing price pressures in the economy.

"I've been on the record for more than a year now saying, 'I don't think that's going to be required for us to get to our 2% target,'" he said in the interview with Fox Business.

"I still believe that today. But if it were the case that inflation moved in the other direction, and we started to see some reacceleration in pricing power, I'd have to take on board the likelihood that a rate increase is appropriate. But I don't see that happening today."

This article first appeared in Investing.com