Atlanta Federal Reserve President Raphael Bostic has stated that interest rate cuts are unlikely to occur until well into 2024. In an interview with CNBC, Bostic emphasized the need for caution, patience, and resolution in the face of economic uncertainty.
Bostic acknowledged progress in inflation and a slowing economy but emphasized that there is still much work to be done before the Federal Reserve reaches its target of 2% annual inflation. When asked about a possible timeframe for the first interest rate decrease, Bostic suggested late 2024.
Despite raising the key borrowing rate 11 times since March 2022, totaling 5.25 percentage points, Bostic believes that further increases are unnecessary. He cautioned, however, that the journey towards achieving acceptable levels of inflation could be lengthy.
Bostic, who is not a voting member of the rate-setting Federal Open Market Committee this year but will have a vote in 2024, does not anticipate rate cuts before the middle of next year at the earliest. He stressed the importance of bringing inflation closer to the 2% target before considering any relaxation of the current economic posture.
Considering recent statements from Federal Reserve officials, including Chair Jerome Powell, expectations for a rate increase at the FOMC’s upcoming meeting at the end of October have been eliminated. The probability of an increase in December currently stands at just 25%, according to the CME Group’s FedWatch Tool.
Market participants are anticipating two or three quarter-point rate cuts by the end of 2024. One potential reason for the Fed to consider easing rates would be a deceleration or recession in economic growth. While Bostic does not foresee a recession, he recognizes the changing economic conditions and has heard from business contacts preparing for a slowdown.
Bostic’s comments come amidst significant movement in financial markets, particularly in Treasury yields. The benchmark 10-year Treasury yield briefly surpassed the important 5% level before easing and currently stands at around 4.97%.
As the economy continues to navigate uncertainties, Bostic’s cautious and patient approach underscores the Federal Reserve’s commitment to achieving its inflation goals and maintaining economic stability.