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Cutting Rates in Q4 Could Be Appropriate if Economy Follows Expected Evolution


Apr 3, 2024

Atlanta Federal Reserve Bank President Raphael Bostic stated in an interview with CNBC that he predicts the US central bank will lower the policy rate only once this year. He emphasized that the economy is maintaining the strong momentum it has had and any weakening is at a very incremental level. Bostic mentioned that over the longer arc, the economy does need to slow to reach its longer-run potential but believes growth and inflation can still be achieved while noting that inflation would drop much slower than expected, leading to a need for the Fed to be more patient.

Bostic revised his forecast to include one rate cut this year and expressed the importance of watching and waiting to see how things unfold. He stated that if the economy evolves as he expects, it would be appropriate to cut rates in the fourth quarter of this year. Bostic predicted that inflation will gradually decrease through 2024 and does not anticipate reaching the 2% inflation target until 2026.

In terms of market reaction, the US Dollar Index did not show an immediate response to Bostic’s comments and was slightly down by 0.04% on the day at 104.70. Bostic emphasized that he is not looking to disrupt the economy’s dynamics unless there are signs of degradation in employment. Despite this, he noted that his contacts have not raised any concerns regarding employment at this time.

By editor

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