Fed’s Bostic expects one rate cut in 2024, as many as four in 2025

Raphael Bostic, the President and Chief Executive Officer of Federal Reserve Bank of Atlanta, stated that a potential cut in the federal funds rate could occur in the fourth quarter of this year, emphasizing a data-driven approach to future policy decisions.

For 2025, Bostic penciled in 5 rate cuts. This outlook is not set in stone, as the policymaker acknowledged the unpredictability of the current economic climate, suggesting that rate cuts, holds, or increases could all be warranted depending on evolving conditions.

“There are plausible scenarios in which more cuts, no cuts, or even a raise could be appropriate. I will let the data and conditions on the ground be my guide,” Bostic said in a prepared speech.

He also underscored the commitment to reducing inflation to the 2 percent target, which is seen as essential for widespread prosperity and effective decision-making among families and businesses.

Achieving this goal does not imply a reduction in prices to pre-2021 levels but aims to create an economic environment where inflation does not heavily influence the mindset of consumers and producers.

Bostic also pointed out the need to look beyond headline figures, noting that despite a semblance of normalcy returning in many aspects of life, the economy is still significantly impacted by the global pandemic.

The effects of policy measures in response to the pandemic have supported the labor market and the broader economy, even amid aggressive monetary policy tightening.

One of the first economic sectors to feel the impact of monetary policy changes is housing, due to its sensitivity to interest rates.

Mortgage banking executives have reported a de facto recession in their industry for the past year as mortgage rates have surged to levels above 7%, a significant increase from previous rates.