Federal Reserve President Raphael Bostic has indicated that investors will have to wait until at least July for anticipated interest-rate cuts. Bostic believes that rate cuts would not be suitable until the third quarter due to the current strength of the economy. This is a quarter earlier than his initial prediction, primarily due to the rapid slowdown in inflation. However, he remains open to adjusting his stance if inflation continues to decrease at a faster pace than expected.
Speaking at the Money Marketeers of New York University, Bostic expressed his cautious approach, stating, “I want to be sure that we’re getting true signals, as opposed to volatility.” He anticipates two rate cuts in 2024 but emphasized the importance of monitoring the inflation rate, which he believes will remain directionally the same but fluctuate throughout the year.
As a voting member of the Federal Open Market Committee, Bostic expressed gratitude for the economy’s strong growth and robust labor market despite the falling inflation rate. However, he remains vigilant about the risk of cutting rates too soon and triggering a re-acceleration in inflation. Bostic acknowledged that a strong economy makes it challenging for prices to fall rapidly.
The recent inflation data showed a slight easing in January but still exceeded Wall Street expectations, with consumer prices up 3.1% compared to the same period last year. This unexpected reading caused a stir in the markets and dashed hopes of an early interest-rate cut in March. Bostic echoed Federal Reserve Chair Jerome Powell’s remarks, emphasizing the need for more evidence that inflation is under control before considering rate cuts.
Bringing the inflation rate down to the Fed’s target of 2% remains a top priority for Bostic. He emphasized the importance of this goal, stating, “I worry we underestimate the cost and the pain that high inflation imposes on people.” Bostic also cautioned against relying solely on historical assumptions when predicting the course of monetary policy in 2024. He believes that current conditions defy previous conventions and that economic history is not repeating itself.
In conclusion, Federal Reserve President Raphael Bostic expects interest rate cuts to be delayed until July, citing the strength of the economy and the need for more evidence of inflation control. While he remains open to adjusting his stance based on inflation trends, Bostic emphasizes the importance of bringing the inflation rate down to the Fed’s target. He also cautions against relying solely on historical data when predicting future monetary policy decisions.