As spending slows, central bank weighs whether to act or hold on rates
Federal Reserve Bank of Atlanta president Raphael Bostic has urged caution on any immediate shifts in interest rates, citing ongoing uncertainty over President Donald Trump's economic policies.
Bostic emphasized the need for more clarity on trade, immigration, and regulatory changes before the Fed can make further moves.
During a moderated discussion in Atlanta on Monday, Bostic made it clear that the Fed must avoid acting hastily in response to evolving economic policies. He explained that the absence of specifics surrounding Trump’s initiatives complicates efforts to forecast the direction of the economy with any certainty.
“The specific place that the economy will land depends critically on the details of where policy lands,” said Bostic. “Because we don’t know that now, again, that’s another reason why I feel like moving too boldly with our policy in any direction wouldn’t be prudent at the moment.”
Since December, the Federal Reserve has kept its benchmark interest rate in a target range of 4.25% to 4.5%.
According to Bloomberg's report, Fed officials have suggested that maintaining these levels will help manage risks associated with tariffs and prevent a surge in inflation.
Despite the Fed's cautious stance, both policymakers and economists have adjusted their outlooks for the economy.
Growth projections have been revised downward, while inflation expectations have risen. Much of this shift is tied to the uncertainty around Trump’s economic policies, with many still unclear on how these changes will affect business investments and consumer behavior.
Bostic also pointed out that while the labor market is nearing the Fed’s maximum employment target, inflation remains above the central bank's 2% goal.
He noted that tariffs may delay the Fed’s efforts to reach this inflation target, a sentiment he had expressed last month when he revised his forecast for rate cuts. He now expects only one reduction this year, down from the two he had previously anticipated.
Looking ahead, Bostic projected economic growth of just over 1% for 2025, but he stressed that this figure is highly uncertain.
He referred to the current state of the economy as a “big pause position.”
Business leaders are reportedly cautious, with many opting to hold off on investments and hiring decisions due to the prevailing lack of clarity on the economy.
“There’s enough uncertainty moving forward about the stability and the robustness of growth that most business leaders are not eager to just sort of get out ahead of things and hire,” said Bostic.
Should the central bank continue to wait for more clarity, or is it time for more decisive action on interest rates? Share your thoughts in the comments below.
