Speaking in an interview with Bloomberg Television, Bostic said that borrowing costs, which currently stand at a more than two-decade high, are “slowing things down” in the U.S. economy and helping to deflate some price pressures.
With interest rates at their current level of 5.25% to 5.5%, Bostic said he expects inflation will continue to fall throughout the rest of the year and continue moderating into 2025. However, he flagged that it will still take some time before price expansion finally retreats back down to the Fed’s 2% target level.
The U.S. labor market, meanwhile, is seen as weaker than 12 months ago, but “not soft,” according to Bostic. Recent data has pointed to a cooling in job demand, a trend that could indicate an easing in activity in the world’s largest economy.
But Bostic added that he does not hope the Fed is forced to bring rates back down to the near-zero levels they were at prior to a sharp round of policy tightening that began in 2022.
He argued that going back to rock-bottom rates would mean that something “bad” has happened in the wider economy, adding that this is a scenario Fed officials want to avoid.
Bostic’s comments come as a number of other Fed officials are due to make statements this week. Markets will likely be keeping a close eye on these speeches for any clues into how policymakers foresee rates evolving in the coming months.
Following figures last week that showed a slower-than-anticipated pace in consumer price increases in April, investors are now penciling in two 25-basis point cuts by the Fed this year, with the first projected to come in September.
Source: Economy - investing.com
