On Tuesday, December 19th local time, Atlanta Fed Chairman Bostic stated that given the strong momentum of the US economy and the need to ensure inflation returns to its target level of 2%, there is currently no urgency for the Fed to cut interest rates. He expects the Federal Reserve to cut interest rates twice in the second half of next year.
At last week's interest rate meeting, the Federal Reserve held interest rates unchanged for the third consecutive time, with the federal funds rate target range remaining at 5.25% -5.5%. The interest rate chart released by the Federal Reserve shows that there will be three interest rate cuts next year. As a result, the market has increased its bets on next year's interest rate cut, and traders expect the Federal Reserve to cut rates for the first time in March next year.
However, since last Friday, several Federal Reserve officials have made hawkish remarks in an attempt to cool down market expectations for interest rate cuts.
"I believe inflation will decline relatively slowly over the next six months, which means we don't need to rush to abandon our restrictive stance," Bostic said during a Q&A session at an event on Tuesday regarding the US economic and business outlook
Bostic said that as inflation continues to decline, he expects the Federal Reserve to cut interest rates twice in the second half of next year. But he also emphasized that decision-makers have not yet had active discussions on this matter.
This statement echoes the speech of New York Fed Chairman Williams last Friday. Williams stated at the time that the Federal Reserve was not really discussing interest rate cuts and would continue to raise rates if necessary. It is precisely from Williams that Federal Reserve officials have been pouring cold water on the market in recent days.
Bostic said that the performance of the US economy is much stronger than he expected a year ago, and he is pleased with this. However, he emphasized that inflation remains high, so decision-makers must continue to work hard to bring inflation back to the target level of 2%.
The core personal consumption expenditure (PCE) price index in the United States increased by 3.5% year-on-year in October, which is a preferred inflation indicator by the Federal Reserve.
Bostic stated that the timing of interest rate cuts is crucial, as the federal funds rate needs to be low enough before inflation returns to target levels in order for the economy to land smoothly and not be unnecessarily hit by rising unemployment rates.
He said that decision-makers must act with caution, as their goal is to bring inflation back to the target level while minimizing the pain experienced by the public.