The US central bank likely remains on track to cut interest rates this year even if the timing and extent of the policy easing is uncertain and further declines in inflation come only slowly, Atlanta Federal Reserve President Raphael Bostic said in an interview with Reuters.
The US central bank likely remains on track to cut interest rates this year even if the timing and extent of the policy easing is uncertain and further declines in inflation come only slowly, Atlanta Federal Reserve President Raphael Bostic said in an interview with Reuters."I still have that belief" that interest rates can be lowered this year despite a first quarter in which the pace of price increases seemed to stall well above the Fed's 2 per cent target, Bostic said in his first public comments since the central bank's policy meeting last week.
So we believe that that we could be on the brink of you know kind of a longer term trend or maybe a kind of an intermediate term trend that could happen with a dollar, whereas a dollar will potentially you know go down in value over time as interest rates go down and that would that would bode well for international stocks.Conversations with businesses in his US Southeast Fed district indicate that wage and job growth will likely slow, Bostic said, and that most firms feel their pricing power is in decline after the fast price hikes that pushed inflation to 40-year highs in 2022."There is an expectation for most of the employers I talk to that they will get back to pre-pandemic wage growth," Bostic said in the interview on Thursday. And with the possible exception of tech companies, "we're hearing from pretty much everyone ... their pricing power is pretty much at its limit."
That should set the stage for further progress on inflation through the year, Bostic said, and for the Fed to eventually begin easing monetary policy.
But it may take a while. Bostic noted, for example, that even though US job growth in April was weaker than expected, the gain of 175,000 positions was still a strong number that needs to ebb further for him to feel it is consistent with the Fed's inflation target.
"I don't think we're going to know that for at least a couple of months," he said.
"I'm hopeful that we do continue to see this slowing down because my outlook really says that you're going to have to see some slowing down in order to get inflation back to our 2 per cent target ... We still are seeing robust job growth."
A voting member of the central bank's policy-setting Federal Open Market Committee this year, Bostic supported the decision last week to hold the benchmark interest rate steady again in the 5.25 per cent-5.50 per cent range that was set in July.
