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Cutting Rates in Q4 Given Expected Economic Evolution

Atlanta Federal Reserve Bank President Raphael Bostic has expressed his view that the US central bank will lower its policy rate just once this year in an interview with CNBC on Wednesday. Despite the strong momentum of the economy, Bostic believes that it may experience some incremental weakening and that it needs to slow down in order to reach its long-term potential. He still expects growth and inflation to continue, but at a slower pace than anticipated.

Bostic emphasized the need for patience in this environment as inflation is likely to decrease at a slower rate than expected. He has adjusted his forecast to include only one rate cut this year, with a potential cut in the fourth quarter if the economy evolves as he expects. Bostic projects that inflation will gradually decrease through 2024 and may not reach the 2% target until 2026.

While Bostic is cautious about the potential bumps in the road ahead, he is not eager to disrupt the economy’s dynamics as long as inflation is moving towards the target rate. However, he stated that any degradation in employment would need to be taken into consideration. Nevertheless, his contacts have not expressed concerns about employment.

The market did not show an immediate reaction to Bostic’s comments, with the US Dollar Index losing only 0.04% on the day at 104.70. Overall, Bostic’s cautious outlook and forecast for a single rate cut this year suggest a measured approach to monetary policy in response to the changing economic landscape.

By Samantha Jones

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