A senior Fed official warned about the risk of inflationary pressures from increased business spending and investment, identifying “pent-up enthusiasm” as a threat that deserves attention.
The president of the Federal Reserve Bank of Atlanta, Raphael Bosticanticipated a first interest rate cut by the US Federal Reserve for the third quarter, followed by a pause at the next meeting to evaluate the effects of the change of politics in the economy.
In an additional comment posted on the Atlanta Fed website, Bostic expressed concern about potential business enthusiasm that could trigger a surge in demand and pricing pressures after the rate cut. This concern reinforces his stance on not cutting rates hastily, underscoring the need to act and then watch the responses of markets, business leaders and families amid uncertainty.
And Jerome Powell?
His remarks preceded the Fed Chairman’s monetary policy testimony, Jerome Powellbefore Congress, where he is expected to reiterate the message of patience regarding rate cuts. Bostic, like most of his colleagues, underscores the underlying strength of the U.S. economy and higher inflation to expectations in January as reasons for patience in rate decisions.
He Federal Open Market Committee voted unanimously to keep rates unchanged in January, but investors are now betting on a start of easing in June, according to futures markets. Bostic also advocates maintaining the current pace of reduction in the size of the Fed’s balance sheet for a long time, instead of making abrupt adjustments in search of a more normal posture.
Despite these challenges, the US official expressed hope that the Fed can reduce inflation to the 2% target without resorting to a recession, considering it a resounding success in historical terms.
Source: Ambito
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