Fed’s Bostic is out with some comments on the economy and policy, saying:
- Does not expect new burst of inflation, though uncertainty is widespread.
- Businesses are optimistic about deregulation but apprehensive about impact of tariff, immigration changes.
- Expects inflation to ease and expectation to remain anchored.
- Overall expectation is for inflation to continue to slowly decline to 2%.
- Businesses say they would try to pass along import taxes to consumers.
- Labor market showing signs of easing, such as difficulty finding a job, but is broadly stable.
- Monetary policy currently in a good place, but this is not a time to be complacent about risks.
- Still sees two Fed rate cuts this year, with a lot of uncertainty.
- Says much could happen to yield more or fewer rate cuts.
- Says inflation data has been bumpy and that is likely to continue.
- Still thinks biggest risk to the Fed’s mandate is from inflation; 2% is the target and the U.S. central bank is not there.
- The aim is still to get to the 2% target without damage to the labor market.
- Possibility of slowing quantitative tightening is not just about the debt ceiling, but also because the Fed does not want to overshoot.
- Does not want its balance sheet to become a source of instability.
- Fed will want to review its current framework language about maximum employment to see how it worked in practice.
- Says he is still trying to understand implications of Trump executive order on the Fed’s role in financial regulation.
- Fed’s current benchmark interest rate is moderately restrictive versus a 3%-3.5% neutral rate.
This article was written by Greg Michalowski at www.forexlive.com.
