Cutting Rates in Q4 Given Expected Economic Evolution

Fed Official: US Economy Needs to Slow Down for Longer-Run Potential – Atlanta Federal Reserve President Raphael Bostic Forecasts Only One Rate Cut This Year

Atlanta Federal Reserve Bank President Raphael Bostic believes that the US economy needs to slow down in order to reach its longer-run potential. In an interview with CNBC on Wednesday, he expressed his forecast for the Fed to lower the policy rate just once this year, due to some incremental weakening. However, he still expects growth and inflation to continue at a slower pace than anticipated.

Bostic emphasized the need for the Fed to be patient in this environment, as inflation is likely to decrease at a slower rate than expected. He adjusted his forecast to include only one rate cut this year, with a potential cut in the fourth quarter if the economy evolves as he expects. Bostic projects that inflation will decrease gradually through 2024 and may not reach the 2% target until 2026.

Despite potential bumps in the road ahead, Bostic is not eager to disrupt the economy’s dynamics as long as inflation is moving towards the target rate. He did mention that any degradation in employment would need to be taken into consideration, but his contacts have not expressed concerns about employment.

Overall, Bostic’s cautious outlook and forecast for a single rate cut this year suggest a measured approach to monetary policy in response to the changing economic landscape. The market did not show an immediate reaction to Bostic’s comments, with the US Dollar Index losing only 0.04% on the day at 104.70.

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