Fed's Bostic: Little reason to cut rates further for now – WSJ
Atlanta Federal Reserve (Fed) President Raphael Bostic told the Wall Street Journal on Monday that he sees little reason to cut rates further for now, per Reuters.
Key takeaways
"Penciled in only one rate cut for all of 2025 at Federal Reserve’s meeting last week."
"I am concerned about the inflation that has been too high for a long time."
"Te current moment is one of the most difficult periods for policymakers because both risks are rising."
"I don't project inflation returning to the Fed’s 2% goal until 2028."
Market reaction
These comments received a hawkish score of 7.2 from FXStreet Fed Speech Tracker. Nevertheless, FXStreet Fed Sentiment Index remains in the dovish territory, well below 100.
Meanwhile, the US Dollar Index stays under modest bearish pressure and was last seen losing 0.22% on the day at 97.42.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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