By Michael S. Derby
(Reuters) -Federal Reserve Bank of Atlanta President Raphael Bostic repeated on Monday that he still sees the central bank cutting its interest rate target once this year, while suggesting there's no urgency to act as a lot of uncertainty remains in terms of how trade tariffs will affect inflation dynamics in the U.S. economy.
As for projecting a single interest rate cut for 2025, Bostic said in an event hosted by Market News International that “I’m still there,” noting he also has three cuts penciled in for next year. Bostic said, “I think we actually have some luxury to be patient because labor markets are actually quite solid.”
Bostic warned that the impact of President Donald Trump's trade tariffs has yet to be felt and he's confident business will be passing on price increases, but it's unclear how much of those increases will be tolerated by consumers who've already suffered through the pandemic-era inflation surge.
“I think there is actually more pricing to come, and it is more a question of time, of when and not if,” Bostic said. He noted firms are currently holding back on price rises amid a search for clarity and a desire to avoid constant small adjustments in prices that irritate their customers.
All involved are also waiting for firmer ground in how the ever-shifting tariff-setting process will resolve itself, Bostic said. He added to the extent tariffs have not been passed on in substantial form, that owes to firms positioning for the import tax surge before it happened, a process that can only delay the adjustment for so long.
“This is still going to take some time before we'll sort of know the answer to those sorts of things,” Bostic said.
The Fed's most recent rate-setting Federal Open Market Committee meeting, held earlier this month, maintained the central bank's interest rate target range at between 4.25% and 4.5%.
Policymakers remain in a wait-and-see mode about the economic outlook amid the president's volatile trade policy. They feel they have the ability to be patient with monetary policy as the economy is currently in a good place.
That said, two officials – Fed Governor Christopher Waller and Vice Chair for Supervision Michelle Bowman – have both expressed openness to cutting rates at the late July meeting. Waller is widely considered to be in contention to succeed Fed Chair Jerome Powell and Bowman was recently elevated to be the Fed's top bank overseer by the president. Trump has been pressuring Fed officials to cut rates and said last week he'll only pick a Fed chair who will lower short-term borrowing costs.
(Reporting by Michael S. Derby; Editing by Andrea Ricci)
