Bostic Affirms Rate Cuts Likely This Year as Inflation Nears Target, Despite Job Growth

According to Atlanta Federal Reserve President Raphael Bostic, the US central bank is likely to follow through with rate cuts this year, despite some uncertainty surrounding the timing and extent of these adjustments. Bostic, who is also a voting member of the Federal Open Market Committee (FOMC), previously expressed confidence that interest rates could be reduced this year, despite a first-quarter lull in price increases that exceeded the Fed’s 2% target. While Bostic acknowledged that job growth has remained strong, he suggested that it will need to slow down before the Fed can consider easing monetary policy. Bostic added that most businesses in his district anticipate a return to pre-pandemic wage growth, with the exception of tech companies whose pricing power appears to be waning due to faster price hikes in 2022. Bostic projected that inflation would return to the Fed’s 2% target by late 2025 or early 2026, allowing the central bank to avoid a sharp increase in unemployment. In contrast, Fed Chair Jerome Powell indicated during a recent FOMC press conference that he still expects three rate cuts in 2024. However, some analysts believe that the Fed is still on course to reduce rates at least once or twice this year, and financial traders anticipate the Fed commencing rate cuts in the autumn, based on the CME FedWatch Tool.