Atlanta Fed President Raphael Bostic recently shared his insights into the state of the U.S. economy and the Federal Reserve’s monetary policy stance. Bostic highlighted the strength of the economy and job market, indicating that there is no immediate urgency to cut interest rates. He also expressed his expectation for two quarter-point rate cuts by the end of the year.

Bostic acknowledged the positive trends in the economy, noting that inflation has slowed more rapidly than anticipated, declining from over 5 percent to 2.6 percent over the past year, Reuters reported.

Before rate cuts “I need to see more progress to feel fully confident that inflation is on a sure path to averaging 2% over time.”

Despite this progress, he stressed the need for caution, stating that it is premature to claim victory in the fight against inflation.

“Many executives tell us they are on pause, ready to deploy assets and ramp up hiring when the time is right,” Bostic said. “If that scenario were to unfold on a large scale, it holds the potential to unleash a burst of new demand…This threat of what I’ll call pent-up exuberance is a new upside risk that I think bears scrutiny in coming months.”

The Atlanta Fed President highlighted several factors contributing to the uncertainty in the economic outlook, including geopolitical concerns, budget issues, and potential disruptions to global shipping. He emphasized the importance of finding a delicate balance in monetary policy to ensure continued economic growth while preventing inflation from persisting above the Federal Reserve’s target of 2 percent.

“Only when I gain that confidence will I feel the time is right to begin lowering the federal funds rate,” said Bostic. “The good news is the labor market and economy are prospering, furnishing the (Federal Open Market) Committee the luxury of making policy without the pressure of urgency.”

In his newsletter, Bostic said, “In closing, let me say that while formulating monetary policy is a complex endeavor, I find it helpful to distill my views into a couple of key terms to communicate with the public and financial markets. In view of the policy context I’ve described, my watchwords now are grateful and vigilant. I am grateful for the substantial progress we have seen in reducing the inflation rate toward the Committee’s target of an average of 2 percent over time. Yet I am vigilant in continually staying on the lookout for developments that could derail that hard-won progress.”

Raphael W. Bostic, Federal Reserve Bank of Atlanta, https://www.atlantafed.org/about/atlantafed/executive-leadership-committee/bostic-raphael