Fed official maintains call for one rate cut in 2025
Federal Reserve Bank of Atlanta president Raphael Bostic said on Monday that the effects of new US trade tariffs may be slower and more persistent than initially expected, potentially complicating the central bank’s efforts to lower inflation.
“There is a risk that seeps into the psyche of the consumer and the business leader,” Bostic said at a Market News International event in London, signaling concern that tariff-induced cost pressures could alter expectations and behaviors across the economy.
Divided views within the Fed
The comments come as Federal Reserve officials remain split on how to interpret the inflationary impact of President Donald Trump’s recent tariffs, a report from Bloomberg noted.
At the June policy meeting, 10 members of the Federal Open Market Committee (FOMC) indicated they could still support at least two rate cuts this year, essentially discounting the short-term effects of tariffs. However, seven officials forecast no cuts in 2025, suggesting that fears of more entrenched inflation persist.
Bostic, who has consistently taken a cautious stance, reiterated his projection for a single rate cut this year, followed by three in 2026. Still, he emphasized that this outlook carries a “high level of uncertainty.”
“The dynamics are such—and they’re playing out in ways—that look-through may not be the right answer,” he said, challenging the traditional view that central banks should ignore temporary supply shocks.
Tariffs may trigger delayed price pass-through
Bostic noted that while businesses are not yet raising prices aggressively, most plan to pass higher import costs on to consumers once economic conditions become more certain, according to a report from Reuters.
“I think there is actually more pricing to come, and it is more of a question of when and not if,” he said, citing findings from Atlanta Fed surveys. He added that some firms have delayed price hikes in the hope of avoiding repeated small adjustments that can frustrate customers.
According to Bostic, some companies had preemptively stocked up on inventory before the tariffs took effect, thereby delaying the immediate price impacts. However, he warned that this buffer will not last indefinitely.
Patience amid a strong labor market
Despite the tariff concerns, Bostic said the US economy remains in a stable position. “I think we actually have some luxury to be patient because labor markets are actually quite solid,” he said.
While two other Fed officials—Governors Christopher Waller and Michelle Bowman—have expressed willingness to cut rates as soon as July, most policymakers remain cautious, awaiting clearer data on inflation trends before making adjustments.
What are your thoughts on the latest analysis? Share your insights below.
