Federal Reserve’s Bostic Encouraged by Continued Strong Economic Momentum, Anticipates Rate Cut in Q4

Slower Economy, Gradual Progress: Speaker Outlines Inflation Target and Interest Rate Plans

The speaker anticipates a faster slowdown in the economy, but there are no signs of it picking up. Any weakening that is happening is happening at a very gradual level. In the long run, it is essential for the economy to slow down to reach the desired inflation target. The speaker is considering the possibility of only one interest rate cut this year and closely monitoring the situation to see how things progress. If the economy continues to evolve as expected, cutting rates may be appropriate in the fourth quarter.

The speaker predicts that inflation will reach its target by 2026, but there are some secondary measures in the inflation numbers that are causing concern about a potential slower movement. Despite these concerns, the speaker is not in a rush to disrupt current economic dynamics as long as inflation remains on track to meet its target. Contacts related to employment have not expressed any worries to the speaker, who takes a more hawkish stance.

The speaker highlights certain aspects of the inflation numbers that are concerning, particularly with rising percentages of goods in the CPI basket growing at rates above 3% and even 5%. This trend resembles high inflation periods and must be closely monitored to ensure it does not lead to upward pricing pressure before any policy decisions are made regarding interest rates.

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