Fed’s Bostic say he now anticipates only one rate cut this year

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Raphael Bostic is president and chief executive officer of the Federal Reserve Bank of Atlanta, he spoke late on Friday. During Asia time I noted here how late he was speaking and expressed a hope he wouldn’t be saying too much of importance …. well, he sure did!

He is now expecting one 25bp cut in 2024, down from the two he was expecting, and he expects that single cut later in the year. He says he is “definitely less confident” than he was in December that inflation will continue to fall towards the Bank’s 2% target

Bostic’s reasoning:

  • economy has proved more resilient than anticipated so much so that he’s doubled his expected GFP growth estimate to 2%
  • sees little or no change in the current 3.9% unemployment rate
  • says 3.9% unemployment was considered an inflationary level not too long go
  • says inflation is falling but more slowly than anticipated, with many items recording outsized price increases

Bostic has concluded that the balance of risks favours waiting longer for cuts.

Bostic says just one rate cut is not a problem, but a good thing:

  • “If we have an economy that is growing above potential, and we have an economy where unemployment is at levels that were deemed to be unimaginable without pricing pressures, and if we have an economy where inflation is moderating … those are good things … That gives us space for patience.”

Bostic is an FOMC voter this year.

OK, so this will make for an interesting Monday morning in Asia / Sunday evening in the US. It’ll sap a few bids from risk assets.

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