Fed’s Bostic Leans Toward One Rate Cut In 2025 On Inflation Worries, Says Trump Tariffs Will Take A ‘Bit Longer To Sort Out’

Atlanta Federal Reserve Chair Raphael Bostic reportedly said he prefers just a single rate cut this year as the central bank tries to balance the concerns surrounding the possibilities of a recession and upward inflation pressure.

The Fed official also pointed out that the tariffs have been larger than the central bank expected at the beginning of 2025.

“For me right now, I am expecting it’s going to take a bit longer for that to sort out. ... I am leaning much more into one cut this year, because I think it will take time, and then we’ll sort of have to see,” Bostic told CNBC.

In its latest monetary policy decision, the central bank's rate-setting committee kept the benchmark overnight borrowing rate unchanged at 4.25% to 4.5%, where it has been since December, and highlighted that uncertainty about the economic outlook has increased further.

At the same time, U.S. consumer prices rose less than expected in April, with the consumer price index (CPI) rising 2.3% annually, below the estimated 2.4%. At the same time, core inflation rose 2.8%.

According to the latest data on the CME FedWatch Tool, traders are currently factoring in a cumulative 50 basis point rate reduction in 2025.

The FOMC had noted that the unemployment rate has stabilized at a low level in recent months, and labor market conditions remained solid. “Inflation remains somewhat elevated,” it said.

However, Bostic, who is not a current member of the rate-setting committee, indicated he is more worried about price pressures. “I worry a lot about the inflation side, and mainly because we’re seeing expectations move in a troublesome way. ... That will make our job harder,” he told CNBC.

Meanwhile, bond markets are under pressure after ratings agency Moody’s downgraded the U.S. credit rating. The 10-year treasury yield surged 11 basis points (bps) to 4.55% while the 30-year yield rose 13 bps to 5.02%.

The iShares 7-10 Year Treasury Bond ETF (IEF) traded 0.66% lower on Monday morning.

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