Atlanta Fed President Bostic, a member of the Fed's 2024 voting committee, said he now expects only one rate cut this year, and that this rate cut may come later than he previously expected.
Bostic has previously said that it would be appropriate for the Fed to cut interest rates twice in 2024, with the first rate cut likely to occur this summer. But he told reporters in Atlanta on Friday that the forecast was full of variables and "we have to see what the data looks like in the next few weeks."
Bostic said he was less confident about the direction of inflation than in December, noting that there was "something troubling" behind the headline data. In particular, he pointed out that the prices of various goods in the consumer basket are rising at a relatively high rate.
A key measure of underlying inflation topped expectations for a second straight month in February, and the Fed's favored PCE gauge is due out this week and is expected to show price pressures are still rising. Bostic said:
"The economy continues to surprise and it's more resilient and dynamic than I predicted. So I'm kind of recalibrating the timing of what I think is appropriate."
Given that the economy is in good shape, "that gives us room to be patient," he said. "We should be patient and wait." Bostic said the economy's resilience has exceeded expectations, and recent data has led him to roughly raise his 2024 U.S. economic growth forecast to 2%. He sees little change in the current unemployment rate of 3.9%, a level that not long ago was considered triggering inflationary pressures. He believes that although inflation is declining in an "arc", the pace is likely to slow.
Regarding the Fed's balance sheet, Bostic supported the Fed slowing the pace of shrinking its asset portfolio "relatively quickly."
Bostic's statement is obviously different from the average dot plot expected by the FOMC last week (three interest rate cuts during the year) and Powell's dovish speech. The FOMC's new Fed forecasts show policymakers remain committed to three interest rate cuts in 2024, even as their forecasts for inflation and economic growth have been revised upwards. U.S. Treasury traders currently see a 69% chance of a first rate cut in June.
Article forwarded from: Golden Ten Data