Fed's Bostic in a FT article over the weekend continues to stump for waiting on cuts

<p>Fed's Bostic in weekend FT article said (the interview did not reference CPI and PPI last week). </p><ul><li>Expressed that if the Fed cuts rates too soon, inflation might fluctuate unpredictably, potentially stalling completely.</li><li>He anticipates a slower progression of inflation going forward but does not expect it to reach the 2% target until 2025, with a prediction of ending this year at 2.25%.</li><li>Believes that interest rates need to remain high until at least the summer, citing the current economic uncertainty in the U.S.</li><li>Expressed surprise at the rapid decline of inflation so far but feels that markets are overly optimistic about the speed of this decline.</li><li>Highlighted potential risks from Middle East conflicts and their impact on business costs in his district.</li></ul><p>Last Monday, Bostic said he did not expect a rate cut until the 3rd quarter. He also said:</p><ul><li>Rise in unemployment would be far less than would be typical in the case given the reduction in inflation</li><li>Fed is in a very strong position right now</li><li>Fed can let restrictive policy continue to work to slow down inflation; expect the process will remain 'orderly'</li><li>Families are catching up to past price increases.</li><li>Pain of higher prices is easing and sentiment should follow</li><li>Goods inflation is back to pre-pandemic levels</li><li>Services inflation is moving more slowly and not expecting big drops</li><li>Many economic measures are back at levels seen in the years immediately before the pandemic</li><li>At this point shorter-term measures of inflation, such as over three and six months, are more important. They are pointing in a positive direction</li><li>Not comfortable declaring victory. Fed needs to 'remain diligent' and 'short run attentive'</li><li>Top line job numbers have been pretty strong.</li><li>The recent strength in jobs has been focuses in a relatively small part of the economy</li><li>Concentrated job growth means that slowing is occurring. Question is if job growth overall falls off a cliff.</li><li>Sees two 1/4% rate cuts by the end of the year (the Fed forecast 80 basis points of cut in their most recent dot-plot).</li><li>Risks are balanced with employment slowing, but inflation still above target. Bias is still to stay tight.</li><li>Policy will still need to be restrictive at the end of the year, but progress on inflation will warrant lower rates</li><li>Wants to be sure that inflation control is 'really, really' there before taking too many steps</li><li>Outlook now is not for inflation to rebound, but Fed still needs to pay attention</li><li>Businesses are saying that hiring practices are normalizing</li><li>Iinflation and employment mandates are not yet in conflict</li><li>Labor markets remain strong in the aggregate and suggest continued momentum in the economy</li><li><p>Plans to work with team over the next six months to get a better view of how balance sheet policy should evolve</p></li></ul>

This article was written by Greg Michalowski at www.forexlive.com.