Raphael Bostic, President of the Atlanta Federal Reserve, still sees room for two rate cuts this year, though much depends on the evolving economic conditions.
Key Quotes
He does not expect a new burst of inflation, though uncertainty is widespread.
Businesses are optimistic about deregulation, but apprehensive about the impact of tariff and immigration changes.
He says his overall expectation is for inflation to continue a bumpy decline to 2%, with shelter inflation likely to ease and expectations anchored.
Businesses say they would try to pass along import taxes to consumers.
The labour market is showing signs of easing, such as difficulty finding a job, but is broadly stable.
Monetary policy is currently in a good place, but this is not a time to be complacent about risks.
He still sees two Fed rate cuts this year, with a lot of uncertainty.
He says much could happen to yield more or fewer rate cuts.
He says inflation data has been bumpy and that is likely to continue.
He still thinks the biggest risk to the Fed's mandate is from inflation; 2% is the target and the US central bank is not there.
The aim is still to get to the 2% target without damage to the labour market.
The possibility of slowing quantitative tightening is not just about the debt ceiling, but also because the Fed does not want to overshoot.
He does not want its balance sheet to become a source of instability.
He will want to review its current framework language about maximum employment to see how it worked in practice.
He says he is still trying to understand implications of the Trump executive order on the Fed's role in financial regulation.
The Fed's current benchmark interest rate is moderately restrictive compared to a 3%-3.5% neutral rate.
A slowdown in the economy because of coming policy shifts is a material concern, but businesses expect 2025 to be a solid year.
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