Fed Not Looking At Slashing Interest Rates Anytime Soon, Says Raphael Bostic

The official added that while the bank has succeeded in managing inflation pressures, persisting risks mean that they are not yet ready to decide on interest rate cuts

Bostic explained that it could be sometime before the Fed feels confident enough to slash interest rates.

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The US is not yet ready to implement rate cuts, the Federal Reserve Bank of Atlanta President, Raphael Bostic, said earlier in the week. The official added that while the bank has succeeded in managing inflation pressures, persisting risks mean that they are not yet ready to decide on interest rate cuts. 

Addressing a gathering organised by the Money Marketeers of New York University Inc, Bostic said, “We have made substantial and gratifying progress in slowing the pace of inflation,” reported Reuters. “My expectation is that the rate of inflation will continue to decline, but more slowly than the pace implied by where the markets signal monetary policy should be,” he added.

Bostic explained that it could be sometime before the Fed feels confident enough to slash interest rates. He noted that it remained too early to call a win over surged inflation and therefore, the officials are not yet comfortable with placing a cut on interest rates. 

“We will likely soon contemplate the appropriate time for monetary policy to become less restrictive. Right now, a strong labor market and macroeconomy offer the chance to execute these policy decisions without oppressive urgency,” he said.

Recently, investors have been keenly awaiting the central bank’s decision on interest rates, with a target set between 5.25 per cent and 5.5 per cent. Experts have anticipated a relaxation owing to moderating price pressures, but several Fed officials have mentioned that it might take longer for the authorities to feel confident about the economy and reduce rates. 

Further, the higher-than-expected statistics on January consumer prices has led to apprehension about inflation easing out, delaying analysts’ expectations of lower rates. Giving an outlook for the coming year, Bostic stated against his counterparts’ expectations with the Fed of slashing rates three times in the year, he noted two cuts for the year as he has been anticipating an uneven retreat in price pressures. These forecasts will be further updated at the next meeting of the Fed.