February 23, 2024

Atlanta Fed's Rafael Bostic: We won't consider cutting rates 'until 2024'

Atlanta Fed President Rafael Bostic said on Monday that he does not expect to cut interest rates until at least 2023, even if there is a recession.

“For me, inflation is number one job. We have to get back to our goals,” he told CNBC’s Steve Lisman in an interview on “Squawk Box.” “If it’s going to pay something, we have to be willing to do it.”

His comments come as the Fed has raised interest rates 10 times since March 2022 in an effort to bring down inflation that was at its highest level since the early 1980s a year ago.

While inflation remains well above the central bank’s 2% year-on-year target, markets are pricing in a Fed that is done raising rates and will actually cut rates several times before the end of the year. That’s largely based on expectations that the economy will slow sharply, with the possibility of a mild recession, which the Fed’s own economists have predicted.

But Bostic said he does not see spending cuts anytime soon and actually expects more spending increases at this point.

Last week’s consumer price index showed headline inflation at 4.9%, while core inflation — which excludes food and energy, which typically gets more emphasis from Fed officials — was at 5.5%.

“What we’ve seen is that inflation has been high, consumers have been very resilient in terms of spending, and the labor market remains very tight. All of this suggests that there will still be upward pressure on prices,” he said. “If action is to be taken, To me, further increases rather than reductions would be a bias.”

Bostic was speaking at the Atlanta Fed’s Financial Markets Conference.

Chicago Fed President Goolsbee also told CNBC that he is taking a more cautious approach to policymaking amid heightened uncertainty.

“As you’re going through these uncertain times, let’s be cautious and patient and look at a lot more data than usual,” Goolsbee said. “We’re a few weeks away from our next meeting, but (we ) are watching credit stress, watching how crazy the debt ceiling is, watching what’s going on in the labor market and prices.”

On inflation, Bostic said he remains optimistic, while Goolsbee said, “Inflation is improving, but not as fast.”

Fewer than half of the CPI reports, which cover the prices consumers pay for a wide range of goods and services, exceed 5% per year, Bostic noted.

This at least provides some indication that things are moving in the right direction.

“There is still a lot of confidence that our policies will be able to bring inflation back to our 2 percent objective,” Bostick said. “And to be completely clear, we will do everything we can to make sure that happens. “