Atlanta Fed President Raphael Bostic expressed concern on Wednesday about the pace of inflation and said he doesn’t see a rate cut until later this year.
The central bank official told CNBC that strong productivity, a rebound in supply chains and a resilient labor market all suggest inflation will fall “much slower than many expect.”
“If the economy develops as I expect and the slow decline in GDP, unemployment and inflation continues to be strong throughout the year, I think it would be appropriate for us to start the downturn at the end of the fourth quarter of this year,” he said on “Squawk Box” . “We just have to look at where the data is coming from.”
Bostic’s comments came as other Fed officials expressed a desire to move cautiously on cutting interest rates. They said a strong economy and tame inflation gave them time to see more evidence that inflation was returning to the central bank’s 2% target.
However, the Federal Open Market Committee, of which Bostic is a voting member, said last month they expected three rate cuts this year, assuming increments of a quarter of a percentage point.
That makes Bostic one of the more hawkish members of the rate-setting body. The market expects the Fed to start cutting interest rates in June or July. That possibility changed Wednesday morning, with market-implied odds of a rate cut in June falling to 54%, down about 10 percentage points from the day before, according to CME Group’s FedWatch indicator.
In an interview Wednesday, Bostic said his views on inflation and interest rates have swung back and forth as he sees data evolving from positive developments in inflation in the second half of 2023 to less certain ground this year.
“The road is going to be bumpy, and I think if you look back over the past few months, inflation hasn’t changed much relative to where it was at the end of 2023,” he said. “There are some secondary indicators in the inflation data that make I’m a little worried that things might be moving slower.”
He said that some commodity components of the inflation indicator used by the Federal Reserve showed that a large proportion exceeded 3%, and some even exceeded 5%.
“Prices are much higher now than they were before and are starting to return to what we saw during periods of high inflation,” Bostic added. “They are moving away from what we would like to see. So, in my view, I want to adjust Ahead of our policy rates, I have to make sure those don’t hide some additional upward pressure and price pressure.”
Most indicators tracked by the Atlanta Fed show inflation above 3%. Its own “sticky” inflation gauge showed 12-month inflation at 4.4% in February.In fact, the only measures are Atlanta Fed’s “Underlying Inflation Dashboard” Below 3% was the personal consumption expenditures price index used by the central bank as its main indicator.
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