MNI INTERVIEW: Bostic Backs Go-Slow On Rates As Tariffs Linger

Atlanta Federal Reserve President Raphael Bostic told an MNI Connect event Monday the potential for tariffs to create inflation pressure into next year means going slow on cutting interest rates with one this year and three in 2026, expressing a broader caution until there's clarity around U.S. fiscal policy and global conflicts. 

Downplaying the Fed's dot plots showing a median of two cuts this year as a mechanical and uncoordinated exercise for FOMC members, Bostic's bigger worry is cutting before it's clear how long companies delay raising prices and how consumers respond. 

Inflation may return to target without raising rates but that isn't certain, Bostic said. “If things play out in a particular way, there may be heightened upward pressure on prices that may require us to raise rates or at least keep them at this level for a longer period than we might otherwise,” he said at the event in London.

“I’m concerned that we may witness a sufficiently significant increase in pricing pressure that any kind of cut would exacerbate and make it harder to get us back down to our target,” Bostic said. “I’d like to avoid that to the extent that I can.” 

KNOWING WHERE TO MOVE

Bostic when asked about the dot plot said he can see lowering borrowing costs once this year and three times in 2026. Firms he's spoken to like many economists have low confidence in where the economy is headed, especially with the prospect tariffs take a while to show up in prices, he said. “When the fog gets thicker, everyone slows down, or pulls over,” Bostic said. (See: MNI INTERVIEW: Fed To Cut Twice In 2025 On Weak Growth-Haslag)

“I like to move in a direction when I know which direction to move in, and that for me would require more information than we have today,” Bostic told MNI's Jean Yung at the Connect. “I’ll want to make sure I have some confidence I know which direction the economy’s moving in.”

Officials learned from the 1970s “people don’t like the Fed bouncing around a lot,” Bostic said. “We actually have some luxury to be patient, because labor markets are actually quite solid in the U.S.,” he said. Bostic also wants to be "absolutely sure" the inflation side of the mandate will be met, he said. 

The FOMC on June 18 maintained rates at a 4.25%-4.5% target range for a fourth straight meeting, and the dot plot showed officials expect two rate cuts later this year. Chair Jerome Powell recently signaled officials are prepared to hold until the effects of tariffs on inflation, jobs and growth are more evident in data, while governors Chris Waller and Miki Bowman said they could countenance a July cut if the data cooperate. 

LUXURY OF PATIENCE

“We actually have some luxury to be patient, because labor markets are actually quite solid in the U.S.," Bostic said. 

There is also no crisis on the inflation side of the mandate, he said. Some big companies are seeking to avoid raising prices or making other changes in response to tariffs as long as they can, Bostic said. Other effects of trade tensions include a material drop in vacation reservations from countries like Canada, he said.

“We’ll be watching to see both how consumer and business responds as this extends on into the future,” Bostic said. Some lower-income families are starting to pick lower cost or quality products, a sign they are sensitive to price increases, he said. 

Bostic cautioned investors on interpreting the Fed's summary rate path. “The dot plot is not a decision document, it’s not a deliberation document. Each of us sends in our dots, they put it on a sheet,” he said. “The things you can elicit from it… the structure of it forces you to talk about a calendar year, not the arc of policy.” Officials have to submit a likely outcome even when all the scenarios are from low odds, he said.