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Atlanta Federal Reserve Bank President Raphael Bostic outlined a cautious approach to lowering the Central bank‘s policy rate, aiming for a gradual reduction to between 3% and 3.5% by the end of next year. Bostic emphasized the importance of reaching the Fed’s 2% Inflation target while maintaining economic stability. He expressed a willingness to implement further cuts to the current short-term borrowing costs of 4.75%-5.00%.

Bostic projected that a neutral Fed policy rate, where borrowing costs neither boost nor hinder economic growth, falls within the 3% to 3.5% range. He anticipates Inflation reaching the 2% target by the end of 2025. Financial markets are anticipating additional interest rate cuts, potentially bringing the policy rate to a 3.25%-3.5% range by September 2025.

The Federal Reserve recently reduced its policy rate by half a percentage point to support the labor market. Despite stronger-than-expected job market indicators, Bostic remains cautious, expecting a single quarter-point cut in the remaining Fed meetings of the year.

Bostic remains optimistic about the economy’s momentum but stresses the need to continue monitoring Inflation and economic growth. He remains confident that the current policies will prevent a recession and drive Inflation back to the target of 2%.

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