MNI BRIEF: Bostic Calls For Rates Hold Until Inflation Slows

Federal Reserve Bank of Atlanta President Raphael Bostic on Wednesday called for holding interest rates steady until price pressures recede, adding that inflation is amore urgent risk than labor market softness. 

"I view the Committee’s monetary policy today as marginally restrictive and favor keeping the funds rate steady until we see clear evidence that inflation is again moving meaningfully toward its 2% target," he told the Atlanta Economics Club. "Despite shifts in the labor market, the clearer and urgent risk is still price stability." 

Inflation has already exceeded target for five years, last estimated to be 2.7% in September. Nonhousing services prices are the main contributor this year rather than shelter, with tariffs also lifting core goods prices, he said. Despite a lack of official data due to the record federal government shutdown, business surveys all point to continued upward pressure on costs and prices, he said. "The upshot is that firms in our survey expect to raise prices well into 2026, and by substantially more than 2%." (See: MNI INTERVIEW: Tariff Inflation Impact Broadens- ATL Fed Study)

Bostic earlier Wednesday also announced his planned retirement as of February 2026.

The shift in the labor market on the other hand may reflect secular forces like reduced immigration, an aging population and slow population growth as well as labor-replacing technologies like AI -- which do not demand a strong monetary policy response, he said. The unemployment rate has essentially been flat for 12 months, and firms are carefully trimming payrolls in response to rising costs and moderating demand, he said. 

"I view the signals from the labor market as ambiguous and difficult to interpret," he said. "Moving policy near or into accommodative territory risks pumping fresh blood into the inflation beast and threatening to untether the inflation expectations of businesses and consumers. I simply do not think that is the proper trade-off we should contemplate right now." (See: MNI INTERVIEW: More Fed Cuts Risk Inflation Spike-Weinberg)