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Bostic from the Fed notes strong economic momentum and predicts a Q4 rate cut

Byeditor

Apr 3, 2024

There have been expectations of the economy slowing down at a faster pace, but the speaker is not hearing any signs of it picking up. If there is any weakening, it is only at a very incremental level. In the long run, the economy needs to slow down to reach the longer-run inflation target. The speaker is considering just one rate cut this year and is closely monitoring the situation to see how things evolve. If the economy progresses as expected, it may be appropriate to start cutting rates in Q4. The speaker predicts that inflation will reach the target in 2026.

There are certain secondary measures in the inflation numbers that are causing concern, indicating that things may slow down even more. The speaker is not in a rush to disrupt the economy dynamics as long as inflation is moving towards the target. Contacts have not raised any concerns about employment. The speaker’s hawkish stance may not quiet the conversation about a more hawkish Federal Reserve. These secondary measures in the inflation numbers, such as the percentage of goods in the CPI basket growing higher than 3% and 5%, are trending back to previous high inflation periods. The speaker will closely monitor these trends to ensure they do not hide any upward pricing pressure before considering a change in the policy rate.

By editor

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