After making an aggressive 50 basis points interest rate cut in September, the Federal Reserve is expected to continue slashing its borrowing cost in the near future. However, Atlanta Fed President Raphael Bostic says that future cuts should be taken with a patient approach.
During a speech at the Forum on American Enterprise in Jackson, Mississippi, Bostic argued that the aim should be to reach the neutral rate, perceived to be between 3% and 3.5%, by the end of 2025. This policy path would get inflation to the Fed’s target of 2% while ensuring the growth of the economy.
“I’m not in a rush to get to neutral,” Bostic said. “We must get inflation back to our 2% target; I don’t want us to get to a place where inflation stalls out because we haven’t been restrictive for long enough, so I’m going to be patient.”
The traders are betting on two more rate cuts by the end of 2024, with each one being projected at 25 basis points. Further cuts are expected to take place in 2025.
Bostic is also in favor of further cuts if there are positive economic indicators to justify them.
“If the economy continues to evolve as it does — if inflation continues to fall, labor markets remain robust, and we still see positive production — we will be able to continue on the path back to neutral,” he added.