Atlanta Federal Reserve President: The U.S. is facing long-term inflationary pressures and should not rush to cut interest rates in the short term
Atlanta Federal Reserve President Raphael Bostic stated that the United States is facing long-term high inflation pressures, influenced by trade policies and geopolitical factors, which may affect consumer psychological expectations. He emphasized that the Federal Reserve should remain patient and should not rush to cut interest rates, as the current economic adjustment process may last a year or longer. Despite the strong performance of the labor market, Bostic believes there are no signs of weakness that would warrant a rate cut, and it is not the right time to adjust monetary policy; maintaining a wait-and-see strategy remains appropriate
According to the Zhitong Finance APP, Raphael Bostic, President of the Federal Reserve Bank of Atlanta, stated on Thursday that the United States is facing a prolonged period of high inflation due to the ongoing evolution of trade policies and geopolitical factors, which may gradually affect consumer psychological expectations. He emphasized that the Federal Reserve should remain patient at this stage and should not rush to cut interest rates.
In a written speech at an economic conference in Germany, Bostic said, "Price adjustments and the economy's adaptation to changes in U.S. trade policy and other new policy changes will not be a one-time, short-term price movement as depicted in standard economics textbooks. Instead, it appears to be a process that could last a year or more."
He further pointed out, "If my judgment is correct, then the U.S. economy is likely to experience a prolonged period of high inflation. I do not believe there will be a sharp surge in inflation, but it will be a process of gradual progression." This slow but persistent risk of inflation may seep into consumers' inflation expectations, thereby increasing the difficulty for the Federal Reserve to control inflation.
Despite the latest data showing that the U.S. labor market remains resilient, with job growth in June exceeding expectations and the unemployment rate slightly declining to 4.1%, Bostic believes that the current labor market "overall remains healthy" and there are no signs of weakness that would prompt the Federal Reserve to cut interest rates prematurely.
He noted that in the current environment of high uncertainty regarding employment, economic growth, and inflation trends, "it is not the time for significant adjustments to monetary policy." Bostic emphasized that the "wait-and-see strategy" currently adopted by the Federal Open Market Committee (FOMC) remains appropriate.
Since December of last year, the Federal Reserve has maintained its benchmark interest rate unchanged several times, despite President Trump repeatedly calling for the Fed to cut rates immediately and significantly
