Fed's Bostic still expects 1 rate cut in 2024 but doesn’t rule out 0 or 2
Atlanta Fed president Raphael Bostic still expects one rate cut in 2024, but is not ruling out the possibility of two or zero depending on the direction of the US economy and inflation.
"At this point, I think it's one. But as months pass, I may move to two or I might move to zero and we'll just have to see where the chips fall," Bostic, a voting member of the Fed's interest rate setting committee, said Tuesday in an exclusive interview on Yahoo Finance Live.
If the economy continues to accelerate, Bostic said he can’t write off "the possibility that rate cuts may even have to move further out.”
But if inflation starts to decline like it did during the second half of 2023 or if there is "pain" in the job market, he said he could pull forward his inflation and policy outlook and vote for cutting rates sooner.
When asked if that meant more than one rate cut was possible this year, he said, "It's possible."
The new comments from Bostic come as investors become increasingly concerned that hot economic data and mixed commentary from some Fed officials could cause the central bank to scale back the number of interest rate cuts this year.
One or two rate cuts in 2024 now seem to be more possible to traders than the median of three estimated by Fed officials at their last meeting in March.
And traders have been reducing their odds of a first cut in June, which now stand at roughly 58% and were as low as 49% in early Tuesday morning trading.
Their concerns follow a strong labor report Friday that showed the US economy generated more jobs than expected in March while the unemployment rate ticked lower and wage growth remained steady, putting the labor market on firmer footing than many economists had predicted.
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Other Fed officials have poured cold water on near-term hopes for an easing of monetary policy.
"I believe it’s much too soon to think about cutting interest rates," Dallas Fed president Lorie Logan said in a speech Friday. "I will need to see more of the uncertainty resolved about which economic path we’re on."
Fed Governor Michelle Bowman also voiced concerns Friday, even saying the Fed may need to raise rates at a future meeting if progress on inflation stalls or reverses. Her baseline outlook, however, is that the Fed will still lower rates this year.
Some Fed officials have offered assurances in the last week that the outlook had not changed, including Jay Powell.
The Fed chair repeated his assertion in a speech Wednesday that central bank officials expect to lower rates at "some point" this year.
