Bostic cautions against more reductions, citing persistent inflation and shifting economic risks
Federal Reserve Bank of Atlanta President Raphael Bostic made clear he did not anticipate further interest rate cuts this year, citing persistent inflation as a primary concern.
In an interview published by the Wall Street Journal, Bostic said, “I am concerned about the inflation that has been too high for a long time. And so I today would not be moving or in favor of it, but we’ll see what happens.” He added that while economic risks have shifted toward employment, the specter of elevated inflation remains front and center for policymakers.
The consumer price index (CPI) rose 0.4% in August on a seasonally adjusted basis, twice the increase seen in July. That pushed the annual inflation rate to 2.9%, up from 2.7% in July and marking the highest reading since January.
Bostic, who is not a voting member of the Federal Open Market Committee (FOMC) this year, outlined his cautious stance following last week’s rate cut by the Fed. He expects only one rate cut for all of 2025. His comments come as mortgage professionals and lenders continue to monitor the central bank’s moves closely, given the direct impact on borrowing costs and housing market dynamics.
Meanwhile, Minneapolis Fed President Neel Kashkari signaled that more cuts could still be possible, citing concerns about the labor market and downplaying the inflationary impact of tariffs. He supported the recent rate cut and advocated for further reductions at the Fed’s final meetings of the year.
Similarly, investment banking giant Morgan Stanley expects four straight 25-basis-point rate cuts, continuing through January.
The mortgage industry has been on high alert for any signals from the Fed, as rate decisions directly affect origination volumes, refinancing activity, and borrower sentiment.
“I think the industry right now is feeling pretty happy because there’s been a pickup in the rates,” Pavan Agarwal, CEO of Sun West Mortgage Company, said.
“I'm not sure whether it's going to last. We'll see how inflation clocks in the next month or two, and whether inflation can remain low. But it's been mixed results with the PPI and CPI numbers. But the good news is that oil prices have been kept at bay, and that’s a major driver for inflation.”
“We’re very optimistic about the fourth quarter. Just in the past few weeks as mortgage rates have come down and we did our own incentive… we’ve seen very big volume. We’re excited about it, we’re prepared for it," United Wholesale Mortgage (UWM) executive vice president and chief strategy officer Alex Elezaj told Mortgage Professional America.
The mortgage sector has already felt the effects of the Fed’s tightening cycle, with rates climbing off historic lows and affordability challenges mounting for homebuyers. The 10-year Treasury yield, on the other hand, rose from 4.04% on September 16 to 4.11% on September 18, and continued climbing to 4.14% by September 19. That’s a 10 basis point jump in just a few days, and the highest level in two weeks.
Even though the Fed lowered its benchmark rate, the 10-year yield went up as investors processed the central bank’s cautious outlook and signals that future cuts may be limited.
Meanwhile, according to recent data from Freddie Mac, mortgage rates continued their late-summer descent this week, with the average 30-year fixed-rate mortgage falling to 6.26%—its lowest level since October 2024.
The drop has triggered a wave of refinancing, with nearly 60% of mortgage applications now for refis, the highest share since January 2022.
