Federal Reserve's Bostic: Interest rates need to remain in a restrictive range to curb inflation
Raphael Bostic, President of the Federal Reserve Bank of Atlanta, stated that the Federal Reserve should maintain the current interest rate in the range of 4.25% to 4.5% to continue combating inflation. He emphasized the need to maintain a restrictive policy stance and mentioned that the employment target has been largely achieved. Bostic expects the Federal Reserve to make two rate cuts this year, but this prediction carries uncertainty
According to the Zhitong Finance APP, Raphael Bostic, President of the Federal Reserve Bank of Atlanta, stated that the Federal Reserve should maintain the current interest rate level to continue applying downward pressure on inflation. Bostic said at a housing conference in Atlanta on Wednesday, "We need to maintain the status quo." He also added, "You could say we are achieving our employment goals, and now we must control the price stability target. We need to maintain a restrictive policy stance."
Last month, policymakers kept interest rates unchanged to allow more time to observe further developments in inflation and to gain a deeper understanding of how President Donald Trump's policies might impact the economy. The Federal Reserve's benchmark interest rate is currently in the target range of 4.25% to 4.5%, down a full percentage point from September of last year.
New data on the personal consumption expenditures price index, an inflation indicator that the Federal Reserve is focused on, will be released on Friday. Data released last Friday showed that the one-year inflation expectation from the University of Michigan rose to 4.3% (up from a previous value of 3.3%), while the five-year inflation expectation rose to 3.5% (up from a previous value of 3.2%), reaching the highest level since 1995.
Bostic stated last week that his baseline expectation is for the Federal Reserve to cut rates twice this year, consistent with his December forecast. However, he also mentioned that this prediction faces more uncertainty. The next Federal Reserve officials' meeting will be held on March 18-19.
Recently, as traders bet that the U.S. will further cut interest rates and Europe will increase borrowing, U.S. Treasury yields have fallen this month, with yields approaching those of German government bonds.
On Tuesday, the yield spread between the two countries' 10-year government bonds narrowed to 184 basis points, the smallest gap since October. This gap is expected to record the largest monthly decline since May