A divide has developed among US Federal Reserve (US Fed) officials, likely over how tariffs are expected to affect inflation.
Projections released at the US Fed’s policy meeting earlier this month showed 10 officials would look through the price impact from tariffs and expect to lower rates at least two times this year. But seven officials penciled in no rate cuts for this year, suggesting they are more concerned that tariffs could lead to more persistent price pressures.
Two US Fed governors, Christopher Waller and Michelle Bowman, have said they would back lowering rates as soon as July if inflation remains subdued.
But many officials have pushed back on that idea, saying they expect to hold rates steady until the fall as they watch to see how much inflation will be affected by tariffs.
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One Cut
Bostic on Monday said the conventional approach of looking through supply shocks might not be appropriate this time, adding that officials need to closely monitor the ways inflation and the economy might be affected by any shift away from globalisation and the practice of producing goods in low cost areas.
“The dynamics are such — and they’re playing out in ways — that look-through may not be the right answer,” Bostic said.
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The Atlanta Fed chief said he penciled in one rate cut for this year and three in 2026, but said there’s a high level of uncertainty around the projections.
He also said he expects inflation can eventually be brought back to 2% without any rate hikes.
Bostic repeated his view that there is not enough information available right now to consider an adjustment in rates. He added that the Fed has the “luxury” of being able to wait for more information because the US labor market still looks solid.
But he made clear he sees price increases on the horizon, citing Atlanta Fed surveys finding businesses expect to pass tariff costs on to their customers.
“I think there is actually more pricing to come, and it is more of a question of when and not if,” Bostic said.
