No Need To Lower Rates? Fed Bostic Reviews Law Attention!

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Interest rates in the US could remain higher than their current levels as the recently increased inflation slowly subsides, according to Atlanta Federal Reserve President Raphael Bostic.


Speaking in an interview, Bostic said that borrowing costs, now at their highest levels in more than two decades, were "slowing down" the US economy and helping to ease some price pressures. With interest rates at the current level of 5.25% to 5.5%, Bostic said he expects inflation to continue to decline throughout this year and remain moderate through 2025. However, he noted that it will still take time before price developments finally return to the 2% target level. Fed.



The US labor market, meanwhile, is seen as weaker than it was 12 months ago, but "not soft," according to Bostic. The latest data shows a cooling in job demand, a trend that could point to a slowdown in activity in the world's largest economy. Even so, Bostic added that he does not expect the Fed to be forced to lower rates back to near-zero levels like before the policy tightening round that begins in 2022.


He argued that a return to very low rates means something "bad" has happened in the broader economy, adding that this is a scenario Fed officials want to avoid. Bostic's remarks came as several other Fed officials are scheduled to make statements this week. Markets will likely be watching this speech closely for any indication of how policymakers see interest rates evolving in the coming months.


Following last week's figures showing a slower-than-expected rate of consumer price inflation in April, investors are now expecting two 25 basis point cuts by the Fed this year, with the first expected to take place in September.

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