Atlanta Fed's Bostic pushes out his first-rate-cut projection to Q4
Atlanta Fed President Raphael Bostic expects only one rate cut in Q4 due to a bumpy disinflation process and slower-than-expected inflation. Atlanta Fed President Raphael Bostic has stated that he expects only one rate cut this year, starting in Q4, due to the current disinflation process. This follows a decrease in GDP, unemployment, and a slow decline of inflation. Bostic, a voting member of the policy-setting Federal Open Market Committee, had previously predicted that the first rate cut would occur in Q3 due to a strong labor market, a rebound in supply chains and robust productivity. He expressed concern that inflation may ease slower than expected due to secondary measures in inflation numbers suggesting slower movement. The latest median projection for three rate reductions in 2024 remains unchanged.
Published : 4 weeks ago by Max Gottlich, SA News Editor in Finance
Atlanta Fed President Raphael Bostic said on Wednesday that he sees just one rate cut this year starting in Q4, on the expectation that the current disinflation process will continue to be bumpy.
“If the economy evolves as I expect, and that’s going to be seeing continued robustness in GDP, unemployment and a slow decline of inflation through the course of the year, I think it would be appropriate for us to do start moving down at the end of this year, the fourth quarter,” he told CNBC in a telephone interview.
In January, when markets had priced in an aggressive easing cycle starting in 2024, before significantly paring back such expectations in the wake of stickier-than-expected inflation readings and resilient economic data, Bostic had called for the first rate cut to take hold in Q3.
Now, a strong labor market, coupled with a rebound in supply chains and robust productivity, is signaling that inflation will ease "much slower than what many have expected," Bostic, a voting member of the policy-setting Federal Open Market Committee, said in the interview.
“The road [to the Fed's 2% inflation goal] is going to be bumpy, and I think if you’ve looked over the last several months, inflation hasn’t moved very much relative to where we were at the end of 2023,” he said. “There are some secondary measures in the inflation numbers that have gotten me a bit concerned that things may move even slower.”
Taking his remarks into account, Bostic is one of the more hawkish members of the FOMC. Policymakers' latest median projection issued in March held firm at three rate reductions in 2024.
Topics: Markets