Due to continued inflation and stronger-than-expected economic statistics, Atlanta Federal Reserve Bank President Raphael Bostic predicts only one quarter-point interest rate drop this year instead of two.
"I'm definitely less confident than I was in December" that inflation will fall below the Fed's 2% objective, Bostic told reporters after a roundtable. He noted that price pressure concerns lowered his rate-cut outlook and delayed the start date this year.
Bostic indicated rate cuts might begin this summer. Most expect the Fed to cut rates in June. He doubled his 2024 U.S. economic growth projection to 2% due to recent evidence showing the economy is more resilient than expected. He stated that the 3.9% unemployment rate, which was inflationary not long ago, did not alter.
He believes inflation is on a "arc" lower, although it may be moving slower, and he is concerned about outsized price rises for some items.
Bostic, a voter this year on the U.S. central bank's interest rate policy and its first official to speak publicly since the Federal Open Market Committee meeting ended on Wednesday, said the balance of risks has swung toward waiting longer before lowering monetary policy.
At the meeting, the Fed held rates constant at 5.25% to 5.5%, with most policymakers still expecting at least three rate reduction this year. Its revised predictions showed weaker inflation and continued economic momentum.
"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.
If we have an economy where inflation is moderating ... those are good things," Bostic explained to reporters. "That gives us space for patience."
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