Atlanta Federal Reserve President Raphael Bostic has warned that further cuts to interest rates could reignite inflation and jeopardize the Federal Reserve’s credibility. In a recent essay, he raised concerns that easing monetary policy might exacerbate already high inflation and disrupt future inflation expectations among both businesses and consumers. Despite recognizing a weakening U.S. job market, Bostic believes a severe downturn is unlikely, attributing current labor dynamics to longer-term economic adjustments, including technological changes and a return to normalcy post-pandemic.
Bostic noted that inflation remains persistently above the Fed’s 2% target and is not expected to significantly decrease before mid- to late 2026. He emphasized the importance of the Fed maintaining its credibility if inflation persists for an extended period. As he prepares to retire in February and is not a voting member of the Federal Open Market Committee (FOMC), Bostic expressed disagreement with the recent quarter-point rate cut, stating he does not anticipate further reductions through 2026. He believes the economy will rebound and inflationary pressures will continue.
His comments come at a time of division within the Federal Reserve. Boston Federal Reserve President Susan Collins supported the recent rate cut but called it a “close call,” advocating for careful guidance moving forward. In contrast, New York Federal Reserve President John Williams expressed confidence in the current policy, expecting inflation to moderate by 2026. The recent decision to cut the federal funds rate by 25 basis points to a range of 3.5%–3.75% has sparked significant debate among policymakers, reflecting the challenging balance between fostering economic growth and ensuring price stability. Bostic’s insights underscore this delicate task.
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