Finance Associated Press, March 5 (edited by Niu Zhanlin).Atlanta Fed President Bostic said on Monday that the Fed is under no pressure to cut interest rates urgently, given the "boom" in the U.S. economy and job market.
He also stressed that inflation is expected to return "slowly" to the 2% target, but it is too early to declare victory. Bostic still believes that two 25 basis point rate cuts by the Fed before the end of the year are appropriate.
Over the past year, the fight against inflation has gone much smoother than expected. The data shows that in the 12 months to January, the overall PCE** index increased by 2.**4%, and the core PCE index is up 28%。
But Bostic noted that the Fed has to "tread carefully" to ensure that the current strong economy does not turn into a "bubble" and a new round of inflation.
And before cutting rates, more progress needs to be seen to fully believe that inflation will certainly reach the 2% target level over time.
Bostic said it was only when he gained that confidence that he would think the time had come to cut rates. "The good news is that both the labor market and the economy are booming, which allows the Federal Open Market Committee (FOMC) to set monetary policy without pressure. ”
On the same day, he also published an article in the Atlanta Fed** saying that he was concerned that a rate cut could unleash a new wave of demand, thereby increasing the pressure**, which may be another reason not to rush to cut rates.
In addition, while headline inflation is moving in the right direction, a closer analysis suggests that it is not yet time to send a clear signal, and the pressure is still a little stronger than expected.
Bostic said that once interest rate cuts begin, policy rates will not continue to fall, and the pace of rate cuts will depend on the reaction of market participants, business leaders and households.
He expects the Fed to pause at its next meeting after the first rate cut to assess the impact of the policy shift on the economy, and he expects the first rate cut to be in the third quarter.
Investors are now expecting the Fed to cut interest rates for the first time in June, but the timing of the first rate cut could be pushed back again if inflation stagnates or the job market and wages continue to be better than expected.
Bostic also said he wants to continue to reduce the size of the Fed's balance sheet at the current pace for some time, rather than taking measures quickly.
He believes that if inflation"Slowly"Returning to the Fed's target level without significant damage to the job market or economic growth, he called it"A huge success", but this result is difficult to guarantee.
Recent talks with business executives have left Bostic both confident in the strength of the economy and worried about a new surge in demand. "Many executives have told us that they are prepared to allocate assets and increase hiring when the time comes. If this situation unfolds on a large scale, it could lead to an explosion of demand, which could trigger an upward inflation. ”
Finance Associated Press Niu Zhanlin).