A top Federal Reserve official said Monday that believes the central bank should cut interest rates once in 2025 and then sit tight to assess the fallout of President Donald Trump’s tariffs on the U.S. economy.
“I’m leaning much more into one cut this year because I think it will take time, and then we’ll sort of have to see,” Federal Reserve Bank of Atlanta President Raphael Bostic said on CNBC’s “Squawkbox.”
He offered one optimistic scenario in which trade deals are quickly negotiated that lead to a steady unwinding of tariffs which kicked in last month. “In that case, you’d see the economy rebound much faster than it would otherwise,” Bostic said, while noting any outcome was hard to predict in the current environment.
He added it would take up to six months to fully gauge how tariffs affect the economic landscape and determine whether more action from the Federal Reserve was necessary. The Fed is charged with the dual responsibilities of keeping inflation low and maximizing employment through its control of interest rates. It recently decided to keep interest rates unchanged at its current level of 4.25 percent to 4.5 percent.
Bostic previously said he believed the Fed would cut interest rates twice in 2025, but his latest comments signal a more cautious approach. While Bostic takes part in the Federal Open Monetary Policy committee meetings assessing the economy, he doesn’t cast a vote in setting interest rates.
A wave of tariffs imposed by President Donald Trump on nearly every country has sent tremors through the U.S. economy. A closely-watched consumer sentiment index dropped for the fifth month in a row, reaching its second lowest-level ever as Americans increasingly worry about the future of their pocketbooks. Atlanta Federal Reserve data shows that year-ahead inflation expectations from private firms have ticked upward 0.3%, reaching 2.8%.
“I worry a lot about the inflation side. Mainly because we’re seeing expectations move in a troublesome way,” Bostic said on CNBC (CMCSA).
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