Fed's Bostic: Caution needed on rate cuts pending clarity on inflation, policies
Investing.com -- Federal Reserve Bank of Atlanta's Raphael Bostic addressed the Atlanta chapter of the National Association of Corporate Directors on Wednesday, discussing topics such as inflation and the labor market.
Bostic stated that the labor market is performing exceptionally well. However, he noted that despite the positive performance, the latest inflation numbers indicate that careful monitoring is still required.
Bostic also discussed the impact of artificial intelligence (AI) on the labor market, suggesting that the deployment of AI could lead to a reduction in the need for workers in some industries. He also noted a potential gap in skills between jobs that could be eliminated by AI and the new jobs that AI could create.
The Federal Reserve official expressed difficulty in making confident forecasts due to policy uncertainty across multiple dimensions. He emphasized the need for the Federal Reserve to maintain close contact with business contacts to understand how upcoming policy changes play out.
Bostic further stated that the Federal Reserve is currently maintaining a cautious approach, waiting for more clarity before making any moves. This includes the ongoing tariff discussions, which Bostic noted have many moving parts and whose impact will depend on the final details.
Bostic also touched on inflation expectations, suggesting that if the economy evolves as expected, it could reach 2% inflation in early 2026. At this point, he would prefer the Federal Reserve to be close to neutral, which he defined as around three to 3.5%.
While he suggested that it might be possible to move closer to this neutral point within the year, he expressed less certainty about when the next step would occur. Bostic indicated that patience might suggest a later cut to allow more time for gathering information.
Finally, Bostic stated he would not feel comfortable making another move on rates until there is more clarity on the direction of the economy.
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