July 12, 2024

Raphael Bostic’s Insights: Why Interest Rate Cuts May Not Happen Until Late 2024

Image Credits: Valerie Plesch/Bloomberg/Getty Images

In a recent interview with CNBC, Atlanta Federal Reserve President Raphael Bostic shared his perspective on the possibility of interest rate cuts, and his insights have certainly raised eyebrows. While most experts predicted rate cuts soon, Bostic’s forecast is quite different.

Bostic acknowledged the progress made in addressing inflation and the slowing economy. However, he emphasized that there’s still significant work to be done before the Federal Reserve reaches its inflation target of 2% annually. When asked about the timing of the first-rate decrease, he replied, “I would say late 2024.”

This statement comes after the Fed had raised its key borrowing rate 11 times since March 2022, totaling 5.25 percentage points. Bostic clarified that he doesn’t see any immediate easing of rates, but he also stressed that the current rate level is “sufficiently restrictive” and doesn’t need further increases.

Bostic’s cautious approach is rooted in his belief that the journey to acceptable inflation levels will take much work. “It’ll be sort of a progression that’s going to take some time. And so we’re going to have to be cautious, we’re going to have to be patient, but we’re going to have to be resolute,” he explained.

While Bostic isn’t a voting member of the rate-setting Federal Open Market Committee this year, he will have a vote in 2024. He expressed his skepticism about rate cuts occurring before the middle of the following year, stating, “I really do try to keep people focused on what inflation is, still at 3.7%. Our target is 2.”

The financial markets have been closely following the comments from various Fed officials, including Chair Jerome Powell. As a result, market pricing now indicates no chance of a rate increase in the upcoming FOMC meeting in late October and a mere 25% probability of an increase in December.

What’s particularly intriguing is that markets anticipate two or three quarter-point rate cuts by the end of 2024. This reflects growing expectations for a potential deceleration in economic growth. While Bostic doesn’t foresee a recession, he does believe that conditions are changing, with businesses preparing for a slowdown.

In conclusion, Raphael Bostic’s unexpected outlook on future rate cuts has added a twist to the ongoing discussion about the Federal Reserve’s monetary policy. Patience and a deliberate approach are the keys to addressing the current economic challenges and achieving the Fed’s inflation target. Financial markets will be watching closely as the journey unfolds.

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