- Atlanta Federal Reserve President Raphael Bostic said Friday he doesn’t expect interest rate cuts until well into 2024.
- “We have to be careful, we have to be patient, but we have to be decisive,” he told CNBC.
Atlanta Federal Reserve President Raphael Bostic said Friday he doesn’t expect interest rate cuts until well into 2024.
Although he cited progress on inflation and a slowing economy, the central bank official told CNBC that there is still a lot of work to be done before the Fed meets its 2% annual inflation target.
“I would say the end of 2024,” Bostic said when asked about a time frame for when the first decline might occur.
The Fed has raised its key interest rate eleven times since March 2022 by a total of 5.25 percentage points. Although Bostic said he didn’t think policymakers would begin easing any time soon, he was careful to emphasize that interest rates had reached a “sufficiently restrictive” level that they no longer needed to be raised.
However, he warned that the road back to acceptable levels of inflation could be a long one.
“The economy is still going strong. My outlook is that inflation will come down, but it won’t fall off a cliff,” Bostic said during the “Squawk Box” interview. “It will be a kind of progress that will take some time. That’s why we have to be careful, we have to be patient, but we have to be determined.”
Bostic is not a voting member of the Federal Open Market Committee, which sets interest rates, this year but will have a vote in 2024.
He said he does not assume “that we will lower interest rates until the middle of next year at the earliest.”
“I’m really trying to get people’s focus on inflation, which is still at 3.7%. Our goal is 2,” he said. “They are not the same, and we need to get much closer to 2% before we consider… any kind of relaxation of our posture.”
After a series of Fed speakers in recent days, including Chairman Jerome Powell on Thursday, market pricing has ruled out any chance of a rate hike at the next FOMC meeting on October 31-November 31. 1. The chance of a rise in December is just 25%, according to CME Group’s FedWatch tool, which measures prices in the fed funds futures market.
The markets expect cuts of two to three quarters of a percent by the end of 2024.
One reason the Fed might consider cutting interest rates would be a slowdown or recession in economic growth. Although Bostic said he doesn’t expect an imminent recession, he does expect conditions to change. Business contacts have told him they are preparing for a slowdown, he said.
“We’re not going to have a recession, that’s not my outlook,” he said. “We will see a slowdown and inflation will fall to 2%.”
Bostic spoke following some significant moves in financial markets, particularly in Treasury yields. After the benchmark yield on 10-year government bonds broke through the psychologically important 5% mark at the beginning of the session, it fell slightly and was most recently around 4.97%.
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