The Federal Reserve pauses interest rate hikes, Bostic: First, see the policy bottom line before making a move
Atlanta Federal Reserve President Raphael Bostic supports the Federal Reserve pausing interest rate hikes under the current economic conditions to observe economic developments and guide future policies. He emphasized the need to clearly understand the policy content, assess the impact of Trump's policies on the economy, and maintain patience. Bostic pointed out that caution should be exercised both now and in the future, particularly regarding the debt ceiling and bank capital allocation issues. He expects that the Federal Reserve will not provide clear guidance on inflation trends at the March policy meeting
According to the Zhitong Finance APP, Raphael Bostic, President of the Atlanta Federal Reserve, stated in an interview on Wednesday that he strongly agrees with the idea of the Federal Reserve pausing policy adjustments in the current economic situation to observe how the economy develops and use this information to guide policy-making in the coming months. Bostic emphasized that it is essential to have a clear understanding of the specifics of the policy before drawing any conclusions.
Bostic pointed out that officials should be patient when assessing the impact of President Donald Trump's policies on the economy. He mentioned that some policies may exacerbate inflation, while others may stimulate investment.
Bostic particularly highlighted the importance of examining the entire set of policies passed by the new government, including those affecting trade, regulation, and immigration, which could trigger inflation or deflation.
Data released last week showed that consumer prices in the U.S. rose more than expected in January. Bostic stated that the biggest question is whether the significant increase at the beginning of the year is a temporary phenomenon or the start of a new trend.
After lowering borrowing costs by a full percentage point by the end of 2024, the Federal Reserve kept interest rates unchanged last month. Officials indicated that they are not in a hurry to cut rates after last year's reductions, suggesting they want to see further improvement in inflation and seek clarity on Trump's policy plans.
Bostic said, "I believe we are still in a restrictive posture, which is exactly what we need."
It is understood that the minutes from the Federal Reserve's January meeting show that as long as the economy remains strong, officials are prepared to keep interest rates at restrictive levels until inflation cools further. Some officials have also suggested the idea of slowing down or pausing the Federal Reserve's asset portfolio reduction, as the dynamics of the debt ceiling in the coming months may cause significant fluctuations in reserves.
In this regard, Bostic emphasized that current and future considerations should be more cautious than in the past six to eight months, with the debt ceiling being one factor and how banks allocate capital also being a concern.
Notably, Bostic stated earlier this month that he hopes to wait "for a while" before cutting rates again and expects that the Federal Reserve will not have a clear inflation trend by the time of its next policy meeting in March