Fed’s Bostic Says He Doesn’t See Urgency To Cut Interest Rates

(Bloomberg) -- Federal Reserve Bank of Atlanta President Raphael Bostic said he doesn’t expect there will be urgency to lower rates next year, emphasizing that the US central bank must be resolute and patient as officials assess their next policy move.

“For me, I’m thinking inflation is going to come down relatively slowly in the next six months, which means there’s not going to be urgency for us to pull off our restrictive stance,” Bostic said during a question-and-answer session at an event in Atlanta.

Bostic said he expects the US central bank will cut rates twice in 2024 — in the second half of the year — as inflation continues to slowly decline, but said, “It is not like there has been an active discussion on this.”

Fed officials kept rates unchanged for a third straight meeting on Dec. 13 and signaled they expect three rate cuts next year, according to their median forecast released after the policy meeting. Markets responded by moving forward their bets for rate cuts, with the first reduction seen likely in March, though several Fed officials have tried to tamp down expectations for steep cuts in early 2024.

Read More: Fed Officials Add to Chorus Pushing Back Against Rate-Cut Bets

Bostic said policymakers will likely need to begin lowering rates as inflation continues moving toward their 2% target, to avoid causing undue damage to the labor market. Speaking in a moderated discussion hosted by the Harvard Business School Club of Atlanta, he said he hasn’t discussed with any of his colleagues how they would approach the decision of when to cut rates. 

“There is still a ton of uncertainty,” Bostic said, adding that officials must be “cautious but resolute.” That “means we’re not going to jump at the first data point. We’re going to let things happen, make sure the trends are really trends.”

Bostic, who will vote on monetary policy decisions next year, said he expects the labor market and price pressures to continue cooling, and said he’s keeping a close eye on 3-month and 6-month inflation readings. “By and large inflation has been consistent and in the right direction, and I want to make sure it stays that way,” he added.

Earlier on Tuesday, Richmond Fed President Thomas Barkin — also a voter on policy decisions in 2024 — said he’s still looking for conviction that inflation is heading back to the Fed’s 2% target. Officials would consider lowering their policy rate if inflation continues to fall, Barkin said, though he demurred when asked how many rate cuts he is forecasting next year.

“If you’re going to assume that inflation comes down nicely, of course we would respond appropriately,” he said in a broadcast interview with Yahoo Finance.

(Updates to note Barkin votes on policy in 2024. The video caption on an earlier version of this story was corrected to indicate Bostic anticipates rate cuts.)

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