(March 25): Federal Reserve (Fed) Bank of Atlanta president Raphael Bostic said he now sees just one interest-rate cut as likely this year, rather than two, with tariff hikes impeding progress on disinflation.

“I moved to one mainly because I think we are going to see inflation be very bumpy and not move dramatically and in a clear way to the 2% target,” Bostic said on Monday in an interview with Bloomberg Television in Atlanta. “Because that’s being pushed back, I think the appropriate path for policy is also going to have to be pushed back.”

Bostic now sees price growth returning to the Fed’s 2% goal at some point in early 2027. That’s in line with his colleagues’ forecasts published at last week’s policy meeting. Officials in September had estimated they would reach their target in 2026. 

The fresh projections also showed policymakers favoured a half percentage point of cuts this year, unchanged from December, according to the median forecast. However, more officials penciled in just one cut or no cuts at all.

In a discussion with Bloomberg journalists after his television appearance, the Atlanta Fed chief emphasised that uncertainty caused by US President Donald Trump’s frequent policy changes are making economic forecasting more difficult.

Nonetheless, he now sees US gross domestic product expanding by 1.8% this year, down from 2.1% in December. He expects the unemployment rate to end the year at around 4.2% or 4.3%, which he said is “still quite strong by historical standards”.

Bostic said the introduction of more tariffs added upside risk to inflation, and a decline in sentiment or a rise in lay-offs would present downside risks to employment. Yet he also emphasised he’s waiting until policy changes are implemented before further adjusting his forecasts. 

“Given how rapidly policy changes from week to week and month to month, it would be very difficult for me to, with any confidence, take on board things until we have actually seen them put in place and sticking,” he said.

Chair Jerome Powell, speaking last week ofter the Fed left rates unchanged, reiterated that officials are in no hurry to adjust rates, saying the US economy is on solid footing despite sagging consumer sentiment.

Powell said he expects the inflationary impact of tariffs will be transitory, signalling officials can look through the price effects of tariffs and lower rates if the labour market weakens substantially — so long as long-term inflation expectations remain stable.

The Fed chair and other policymakers have downplayed a series of reports from the University of Michigan showing a rise in long-run inflation expectations, saying other measures of expected inflation have largely remained steady.

Powell’s use of the word “transitory” surprised many Fed watchers as it revived a term central bank officials used through much of 2021 to describe the pandemic’s impact on price pressures. In that instance, Powell and others were ultimately proved badly wrong.

Bostic was unwilling to embrace the term. “I am not going to say that word,” he said. “Nope.”

While tariffs have historically had a one-time impact on prices, Bostic said the recent bout of high price growth could mean a more sustained impact this time.

“We have just gone through a period of elevated inflation, so it’s very much on the consumer’s mind,” Bostic said. “I fear that they might be more sensitive to higher prices today than they have been in the past. But they might not, and we will just have to see how it plays out.”

Bostic also said he would rather keep rates on hold, even if it means the Fed might have to move more forcefully at some point. In the current uncertain environment, that’s better than risking a move in the wrong direction and later having to reverse course.

Also at last week’s meeting, officials announced they would slow the pace at which they are letting Treasuries mature off the central bank’s balance sheet. Bostic said he would prefer to remain at the current pace until it’s time to stop the wind down altogether.

He also said he would “think about” selling the Fed’s mortgage securities holdings outright, as long as it doesn’t disrupt the mortgage market or money markets more broadly.

Bostic also said the job of Fed policymakers would get more difficult if US courts clear the way for the president to fire Fed governors. 

The Trump administration’s dismissal of two Democratic commissioners for the Federal Trade Commission is being watched as the most direct challenge yet to a 1935 Supreme Court ruling that paved the way for the independent agencies that now populate the US government.

“It would make the job harder, because you will just face even more intense pressures, at every time horizon, than we do now,” Bostic said. “Not to say it’s impossible. It’s just harder.”

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