Cutting Rates in Q4 Given Expected Economic Evolution

Atlanta Federal Reserve Bank President Raphael Bostic expressed his forecast for the US central bank to lower the policy rate just once this year in an interview with CNBC on Wednesday. He noted that despite maintaining strong momentum, the economy may experience some incremental weakening. Bostic believes that the economy needs to slow down in order to reach its longer-run potential, but he still expects growth and inflation to continue, albeit at a slower pace than anticipated.

Bostic emphasized the need for the Fed to be patient in this environment, as inflation is likely to decrease at a slower rate than expected. He 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 decrease gradually 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. However, he stated that his contacts have not expressed concerns about employment.

In conclusion, 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 Bostic’s comments, with the US Dollar Index losing only 0.04% on the day at 104.70. Overall, it seems like Bostic is taking into account both economic growth and inflation while making his predictions for future monetary policies of Federal Reserve Bank of Atlanta.

By Samantha Johnson

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