Cutting Rates in Q4 Given Expected Economic Evolution

Atlanta Federal Reserve Bank President Raphael Bostic has projected that the US central bank will lower its policy rate only once this year, in an interview with CNBC on Wednesday. Despite maintaining strong momentum, he believes that the economy may experience some incremental weakening and believes it needs to slow down in order to reach its longer-run potential.

Bostic emphasized the importance of the Fed’s patience in this environment 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 gradually decrease through 2024 and may not reach the 2% target until 2026.

Despite potential 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 did mention that any degradation in employment would need to be taken into consideration, but his contacts have not expressed concerns about employment.

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. The market did not show an immediate reaction to his comments, with the US Dollar Index losing only 0.04% on the day at 104.70.

By Aiden Johnson

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