Atlanta Fed President Rafael Bostic said inflation could “see-saw” if policymakers cut rates too soon, and the decline in inflation toward the central bank's 2% target will slow in coming months. The Financial Times reported on Sunday that it was likely to happen.
“We expect inflation to move more slowly going forward,” Bostic, a voting member of this year's Federal Open Market Committee, said, adding, “There is also a risk that inflation will stall completely,” according to the paper. ” he added. report.
The Atlanta Fed president acknowledged that price pressures have fallen faster than expected in 2023, but that inflation is likely to be near 2.5% by the end of the year and that the Fed's goal will not be reached until 2025. The FT reported that it still believes it will.
After the Fed's policy vote in December, Bostic said he believed interest rates would need to remain unchanged until the end of the summer. He told the Financial Times that such a cautious approach was necessary given the uncertainties facing the U.S. economy.
“Inflation must be firmly and firmly returned to the 2% target,” Bostic was quoted as saying by the newspaper. “If we start easing and inflation starts seesawing up and down, that's going to be a bad outcome. That will erode people's confidence in what's going on with the economy.”
According to the FT, Bostic said the recent rise in shipping costs due to the Suez Canal traffic disruption caused by the Houthis targeting ships needed to be monitored “very closely”.
“It will be very interesting to see how much the Middle East conflict and attacks on container ships start to show up in the cost structure of companies in my district,” Bostic told the paper.
In an interview with Reuters in December, Bostic said the Fed could start cutting rates “sometime in the third quarter” of 2024 if inflation falls as expected.
