Investing.com -- The Federal Reserve does not need to cut interest rates soon as companies plan to raise prices later this year in response to higher import taxes, Atlanta Fed President Raphael Bostic told Reuters.
"I think we have some space and time" to watch how tariff and other policy debates evolve, Bostic said in an interview at his office in Atlanta. He expects the Fed will only need to approve a single quarter-point rate cut late in 2025, based on his projection that economic growth will slow to around 1.1% this year with inflation returning to nearly 3% by year’s end.
While some Fed officials suggest rates could fall as early as July, Bostic noted the job market shows little sign of weakening, and inflation remains a concern.
"I’m more concerned about what happens if we don’t get to our 2% mandate. Because of that I’m willing to stay in this restrictive posture for longer just to be absolutely sure," said Bostic, referring to the current 4.25% to 4.5% policy interest rate the Fed has maintained since December to control inflation.
Bostic anticipates the Fed will "know enough to move" in "the last quarter" of the year.
Fed policy will be in focus during congressional hearings this week, with Fed Chair Jerome Powell beginning two days of testimony Tuesday before the House Financial Services Committee.
Business leaders have become less concerned about extreme tariff scenarios, according to Bostic. Executives have told him they feel confident about developing strategies to manage expected tariff levels.
These strategies include implementing price increases, possibly in several phases over time, as companies respond to competitors, negotiate with suppliers, and monitor consumer reactions.
"They tell me ’I’m pretty sure I am going to have to raise my prices. The question is not whether but when,’" Bostic said, citing this as a major reason he remains cautious about cutting rates until more information becomes available.
Bostic’s forecast of a single cut this year is less aggressive than the two quarter-point cuts projected by the median of the Fed’s 19 policymakers in their forecasts released last week.
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