Economy Matters

Atlanta Fed president Raphael Bostic said his uncertainty about the economy guides his current position to wait for more data before he will support changing the target range for the nation's benchmark interest rate.

On January 29, all 12 voting members of the Federal Open Market Committee (FOMC) voted to maintain the benchmark rate in the range of 4 1/4 to 4 1/2 percent. The FOMC Summary of Economic Projections from the December 2024 meeting indicated a median expectation from participants of roughly 50 basis points, or 0.5 percentage points, in reductions this year, down from a median projection at the September meeting of roughly 100 basis points, or a full percentage point. (As a Reserve Bank president, Bostic is a participant in FOMC policy deliberations but does not cast a vote on monetary policy this year.)

"I'm prepared, and I'm comfortable and very satisfied, to wait for a while and that would be fine," Bostic said in a moderated discussion with former Atlanta Fed president Dennis Lockhart at the February 3 meeting of the Atlanta Rotary Club. "It depends on what happens. If it becomes clear where the economy is going, I will be good to move."

The Atlanta Fed's business contacts throughout the Southeast portray the region's economy as having grown modestly since mid-November. Employers reported an ample supply of workers and a broad easing of wage pressures, particularly among white-collar workers. Input costs and prices rose modestly, according to the January 15 Beige Book, a compilation of anecdotal reports from contacts across the region served by the Atlanta Fed.

Lockhart, who served as president of the Atlanta Fed for a decade ending in 2017, said it appears to him that Bostic and his FOMC colleagues are more reactive to real-time data than to forecasts, as was the case during his tenure. Bostic concurred, explaining that the models that informed policies in the past were crafted for an economy different from today. Bostic cited influences such as the Covid-19 pandemic and balance sheets of businesses and consumers that are stronger than usual at this time in an economic cycle.

"You can't apply them as well because the context is so different from when those models were built," Bostic said. "They were built on relations between certain factors, and there is reason to think they are not prevailing today. … It can be a guide, but you're going to have to tweak and adjust it."

Bostic said inflation is not stuck, and his outlook is that it will continue to fall toward the 2 percent target of the FOMC. He used the word "bumpy" to describe the downward trajectory.

Lockhart's final question addressed the FOMC's independence in setting the nation's monetary policy. Bostic responded that "we have to protect" that independence to provide the long-term monetary policies that support an economy that performs well over time, rather than being adjusted for short-term outcomes.

"Every day in this job I remember what we do," Bostic said. "Focus on the data, the feedback from conversations with individuals, to deliver stable prices and maximum employment. Full stop."

The FOMC's projected benchmark interest rate for the end of 2025 is 3.9 percent, according to the median of economic projections issued in December 2024 by Federal Reserve Board members and Reserve Bank presidents, under their individual assumptions of projected appropriate monetary policy.

Read Bostic's message delivered in December 2024, "Heading into 2025 with Positive Economic Outlook, Mindful of Risks," and listen to his January 7 podcast episode, "'There's Still a Lot of Uncertainty': Atlanta Fed President Bostic Looks Back on 2024."

Read the Federal Reserve's FOMC statement, issued January 29.

David Pendered

Staff writer for Economy Matters