In an interview with CNBC on Monday, Atlanta Federal Reserve (Fed) President Raphael Bostic said that inflation is not moving to target as fast as anticipated and reiterated that he leans toward only one rate cut this year because it will take time to understand the impact of tariffs, per Reuters.
Key takeaways
“Moody’s downgrade will cut across economics, financial markets.”
“Downgrade will have implications for cost of capital, could ripple through economy.”
“Will have to wait and see about impact of downgrade on demand for US debt.”
“The Fed will have to determine how the downgrade effects an outlook that is already in flux.”
“It is unclear if consumers today can take on the full cost of tariffs given the state of household balance sheets, recent inflation.”
“Number of rate cuts this year depends on how things turn out, the details of the tariffs will matter.”
“”There is a scenario where tariffs become less of a story over time.”
“Treasury markets are functioning quite well.”
“Uncertainty means there is higher risk, the Fed only controls one part of the price of capital.”
“As things get more expensive, it changes the choices policymakers, households and businesses face, that will influence the path of the economy.”
“Right now see more risk of higher inflation than the employment side of the mandate.”
“Inflation expectations are moving in a troubling way.”
“Have not seen much movement on the jobs side, firms say they don’t have plans for large layoffs.”
“Decline in sentiment is not yet playing out in the marketplace.”
Market reaction
The US Dollar stays under bearish pressure following these comments. At the time of press, the USD Index was down 0.75% on the day at 100.22.
