On Friday local time, Atlanta Federal Reserve Chairman Bostek stated that if inflation falls as expected, two 25 basis point rate cuts are expected in 2024, with the first occurring "at some point" in the third quarter.
Although the two rate cuts cannot be said to be a certainty, Bostic has provided the clearest interest rate path for the Federal Reserve so far. Unlike other officials who are either vague about interest rate cuts or even stating that they may raise interest rates, it suppresses market optimism.
Bostek said in an interview that he expects the PCE inflation rate to reach 2.4% by the end of 2024, which is enough for the Federal Reserve to cut interest rates twice in the second half of next year.
When announcing the interest rate decision on Wednesday this week, the Federal Reserve's interest rate chart showed a 75 basis point cut in 2024, suggesting a possibility of three rate cuts next year. Bostic stated that lowering interest rates is not an urgent matter, but has instructed staff to start developing possible principles and thresholds to guide the rate reduction process.
He stated that decision-makers still need several months to receive sufficient signals and have enough confidence in the continued downward trend of inflation to lower interest rates.
Bostic pointed out that, however, decision-makers first need to determine what kind of inflation level is necessary to lower interest rates, but the data is already close. "In the coming weeks... I think we will start discussing this issue."
Bostic's speech also provided more details for the policy shift that began at this week's Federal Reserve policy meeting. Officials unanimously believe that the current policy interest rate level is sufficient to curb price pressure without another "unexpected inflationary shock".
In addition, Bostic will become a voting member of the Federal Open Market Committee (FOMC), the Federal Reserve's policy-making body, next year. He is more dovish than most members and has always been a minority of the Federal Reserve, warning against excessive tightening of policies and unnecessary damage to employment and livelihoods.
Bostic also stated that since the last interest rate hike, inflation has decreased faster than he expected, although he believes that sustained growth in the US economy will avoid a surge in unemployment and achieve what the Federal Reserve hopes for; Quota; Soft landing; Quota;.
But just as he is cautious about excessive interest rate hikes, Bostic pointed out that he is also cautious about premature rate cuts. He said he hopes to ensure that inflation is fully controlled before interest rate cuts, in order to avoid any "accidents". In fact, Bostek's two 25 basis point rate cuts were lower than many of his colleagues believed to be three or more rate cuts.
Bostic claims that the inflation levels for the next 3 and 6 months will be useful indicators for future discussions, with the PCE index currently around 2.5%, excluding food and energy prices.