Raphael Bostic, President of the Federal Reserve Bank of Atlanta, has indicated that he foresees a single quarter-point rate cut occurring late next year, in a bid to manage the pace of economic slowdown. The announcement was made last week during the Fed's Summary of Economic Projections. He further stated that he did not raise his view of the longer-run federal funds rate, expressing that it is appropriate for rates to hold for an extended period.
Bostic also shared his outlook on inflation, predicting it to approach the targeted 2% by the end of 2025. This comes as he observed signs of balance in the labor market and businesses reporting that hiring and wage growth are likely to slow down. He also noted that the share of goods with faster price increases has declined and businesses expect this slowing trend to continue.
However, Bostic remains cautious about the potential impact of rising long-term rates on the economy. He noted that while these rates have reached their highest levels since 2007, they have not yet impacted business beyond what would typically occur in a normal tightening cycle. He emphasized the need for close monitoring of economic indicators and consumer behavior before adjusting his outlook for monetary policy.
The Atlanta Fed president pointed out that some areas have seen accelerated home buying despite high prices, which will be a factor in assessing overall economic responses to these tighter conditions. He also highlighted that energy prices and geopolitics pose upside risks to inflation.
Bostic also commented on ongoing discussions at the Atlanta Fed about whether elevated GDP could be associated with disinflation if worker productivity rises. He expressed hopefulness that productivity could be an answer to maintaining strong growth while bringing inflation down. However, he acknowledged that if this is not the case, growth may have to go below trend.
On Tuesday, Bostic released an essay arguing that risks are more balanced and significant progress has been made on inflation, without leading to widespread unemployment and slower economic growth. He stated that this progress has put a soft landing within reach, and he will be working hard to achieve it.
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