The earliest rate cut in July? Federal Reserve's Bostic sings a different tune: inflation may rebound, and the impact of tariffs should continue to be monitored

After the dovish remarks from Waller, Bowman, and Goolsbee, Bostic stated that he is not in a hurry to cut interest rates.

On Tuesday, Raphael Bostic, President of the Federal Reserve Bank of Atlanta, said in an interview at his office in downtown Atlanta that given that companies plan to raise prices later this year due to increased import tariffs and the job market remains stable, the Federal Reserve currently does not need to cut interest rates. He stated:

“I believe we have time and space to observe how tariffs and other policy disputes evolve.”

“I expect the Federal Reserve will need to cut rates at most once before the end of 2025, as I judge that U.S. economic growth may slow to 1.1% this year, but inflation will return to around 3% by the end of the year.”

Bostic still believes that there are almost no obvious signs of weakness in the job market, and inflation remains a risk:

“What I am more concerned about is what happens if we do not reach the 2% inflation target. For this reason, I am willing to maintain the current tightening policy for a longer time to ensure that we are completely safe.”

He referred to the policy interest rate level maintained by the Federal Reserve since last December, which is between 4.25% and 4.5%, aimed at suppressing inflation.

Bostic pointed out:

“I believe we will not have enough information to decide whether to act until the fourth quarter of this year.”

After several months of turmoil, during which the market was once worried about falling into recession due to Trump's proposal of the highest tariffs in history, Trump later backed down, and the risks eased. Bostic stated that recent corporate confidence has improved, a point also mentioned by Powell at last week's press conference.

Bostic noted that corporate leaders have lowered their expectations for a 'doomsday scenario,' which includes soaring tariffs and prices, and a sharp decline in demand. He also said that corporate executives told him they are confident in their strategies to cope with the potential tariff levels.

He pointed out that these strategies include gradually raising prices, with companies adjusting prices in phases based on competitors' responses, negotiations with suppliers, and consumers' adaptability.

Bostic said:

“They told me that it is almost certain that prices must go up; the question is not 'whether to raise' but 'when to raise.'”

This is one of the main reasons he is reluctant to cut interest rates hastily.

Bostic expects to cut rates only once this year, by a total of 25 basis points, which is lower than the median forecast of two rate cuts totaling 50 basis points from 19 Federal Reserve policymakers last week.

Although Bostic does not have a vote on interest rate decisions this year, he still participates in policy discussions like other Federal Reserve officials.

Currently, Trump has been criticizing the Federal Reserve's monetary policy as too tight, and there are divisions within the Federal Reserve regarding the outlook. Ten officials support at least two rate cuts by 2025, while seven officials believe rates should remain unchanged until the end of the year.

According to a previous article from Wall Street Watch, Federal Reserve Governor Waller and Vice Chair Bowman, appointed by Trump, believe that if inflation remains controlled, they may support a rate cut in July. The dovish Goolsbee, President of the Federal Reserve Bank of Chicago, believes that if tariffs do not lead to a rebound in inflation, the Federal Reserve can cut rates Since December of last year, the Federal Reserve has kept the benchmark overnight interest rate unchanged. Due to uncertainties in its trade policies and other policies, along with recent risks of conflict with Iran, these factors have prompted the Federal Reserve to maintain a more cautious stance.

The United States is set to impose tariffs of up to 50% on the European Union and several countries and regions on July 9, and the related uncertainties remain significant. Bostic stated that many businesses in his Federal Reserve's southern district are still struggling to suppress price increases, but the available means have almost been exhausted.

Bostic said, "More and more businesses are telling me that the strategies they originally used to 'hold off on raising prices' have now reached their limits. They worked before, but it is no longer realistic to drag it out any longer."