Fed’s Bostic Now Anticipates Just One Rate Cut This Year

Mar 22, 2024

(Bloomberg) – Federal Reserve Bank of Atlanta President Raphael Bostic says he now projects just one interest-rate cut this year, adding that reduction will likely happen later in the year than he previously expected.

Bostic had previously said that it would be appropriate for the Fed to lower rates twice in 2024, with the first of those cuts likely coming this summer.

It was a “close call,” Bostic told reporters in Atlanta on Friday. “We will have to see how the data come in over the next several weeks.”

The Atlanta Fed chief said he is less confident on the trajectory of inflation than he was in December, noting “some troubling things” underneath the headline figures. He pointed specifically to the breadth of items in the consumer basket that are rising at an elevated rate.

A key gauge of underlying inflation topped expectations for a second month in February, and the Fed’s preferred measure — released next week — is anticipated to show still-elevated price pressures.

Fed officials held interest rates steady for a fifth consecutive meeting Wednesday and narrowly maintained their outlook for three interest-rate cuts this year. Following the decision, Chair Jerome Powell said central bankers expect to gain confidence that inflation will move to the 2% goal and that the first reduction would likely be “at some point this year.”

While policymakers see the federal funds rate reaching 4.6% by the end of 2024, according to their median rate projection, individuals’ expectations were split. The Fed’s “dot plot” showed 10 officials forecast three or more quarter-point cuts this year, while nine anticipated two or fewer.

“The economy continues to deliver surprises and it continues to be more resilient and more energized than I had forecast or projected,” Bostic said. “And so as a consequence, I’ve sort of re-calibrated when I think it’s appropriate to move.”

Given that the economy is doing well, “that gives us space for patience,” he said. “And we should just be patient.”

Regarding the Fed’s balance sheet, Bostic supports slowing the pace at which the central bank shrinks its portfolio of assets “relatively soon.”

Fed’s Bostic Repeats Expectation of Just One Rate Cut This Year

Mar 25, 2024

(Bloomberg) – Federal Reserve Bank of Atlanta President Raphael Bostic reiterated his expectation for one interest-rate cut this year, adding the central bank can afford to be patient as long as the economy holds up.

“I have an outlook for how the economy’s going to perform,” Bostic said Monday during a moderated conversation hosted by the University of Cincinnati’s Real Estate Center in Ohio. “If it does that, then I think we can afford to be patient.”

Bostic said Friday that he now projects just one interest-rate cut this year, adding that reduction will likely happen later in the year than he previously expected. He described the decision to shift his forecast from two cuts to one as a “close call.”

“The goal and the reality is that we’ve got to let the data guide us,” Bostic said.

Fed officials held interest rates steady last week and narrowly maintained their outlook for three interest-rate cuts this year. Individuals’ expectations of the rate outlook, however, were split.

The central bank’s “dot plot” showed 10 officials forecast three or more quarter-point cuts this year, while nine anticipated two or fewer. Chicago Fed President Austan Goolsbee said Monday that he was among the policymakers anticipating three interest-rate cuts this year.

Following the decision, Chair Jerome Powell said central bankers expect to gain confidence that inflation will move to the 2% goal and that the first reduction would likely be “at some point this year.”

“As long as the economy is strong, as long as GDP is high, as long as businesses are hiring and folks have jobs, I’m not in a hurry to get inflation down to 2%,” Bostic said. “If it continues on a trajectory, I’m happy with that.”

Bostic also said the Fed wants to avoid sparking market volatility as it shrinks its portfolio of assets, noting at some point the central bank will slow the pace of runoff.

–With assistance from Steve Matthews.