Atlanta Fed's Bostic Discusses Recent Policy Decision, Economy Outlook
Wednesday, March 26th, 2025
In an interview on Monday, Atlanta Fed president Raphael Bostic said he expects inflation will remain bumpy as it hovers above the Fed's target rate of 2 percent until early 2027. He favors one rate cut this year in the Federal Reserve's policy interest rate, in contrast to the two cuts forecast by the Fed's rate-setting committee. "I moved to one [rate cut this year] mainly because I think we’re going to see inflation be very bumpy and not move dramatically and in a clear way to the 2 percent target," he said.
Bostic spoke in a livestreamed interview with Michael McKee, an international economics and policy correspondent for Bloomberg Television and Radio. Topics included Bostic's expectations for inflation, the potential economic effects of tariffs and immigration, consumer prices, and the Federal Reserve's credibility.
Bostic's remarks were his first public comments following the Federal Open Market Committee's (FOMC) decision on March 19 to leave its rate target unchanged, at 4-1/4 to 4-1/2 percent. In addition, the Committee voted to begin in April a reduction in the monthly redemption cap on Treasury securities from $25 billion to $5 billion. Eleven of 12 voting members supported the position at the Fed meeting. (Only one member dissented, citing support for maintaining the fed funds rate but preferring to maintain the current pace of runoff in securities holdings.)
Bostic told McKee that he had revised downward his December projection of two rate cuts in 2025 to just one reduction this year. Bostic attributed this decision to uncertainty about many aspects of the economy, a view he's expressed in recent months. The FOMC signaled two rate cuts this year in its latest Summary of Economic Projections. Although this forecast largely aligns with the Committee's January forecast, Fed chair Jerome Powell noted that uncertainty in the economy could influence the projection on future interest rate decisions. (While Bostic is a participant in FOMC deliberations, he does not cast a vote on policy moves this year.)
Bostic discussed economic uncertainty and the response of consumers to price increases business leaders have told the Atlanta Fed they expect to implement this year. "They [business leaders] think consumers are going to be able to manage these higher levels of prices and whatever changes in prices that happen moving forward," he said. "We'll have to see if that actually plays out. I think that will be one of the big questions and stories that emerges through the course of 2025—namely, how the consumer manages in the face of these elevated price levels."
The Atlanta Fed's regional business contacts portrayed the region's economy as having grown modestly from January through mid-February. Employers reported headcounts as flat and likely to remain so. Most firms said they expect to pass on to consumers any additional costs related to international trade policy. Energy contacts reported increased power demands from growth in population and data centers, according to the Atlanta Fed's portion of the March 5 Beige Book, which compiles anecdotal economic information from contacts across the region served by the Atlanta Fed.
McKee eventually touched on the matter of the Fed maintaining its credibility. "I do think we have a lot of credibility," Bostic said. "I talk to lots of folks, and at the end of almost every meeting I get thanked for what we're doing as a collective. To me, that's the true measure. … The feedback has been appreciation about how we've approached the job, and it's our intention to keep doing it."
Read Bostic’s message delivered in February 2025, “Uncertainty Calls for Caution, Humility in Policymaking,” and listen to his January 7 podcast episode, “’There's Still a Lot of Uncertainty’: Atlanta Fed President Bostic Looks Back on 2024.
Read the Federal Reserve's FOMC statement, issued March 19.
