Federal Reserve's Bostic: Inflation will gradually ease, policymakers should be cautious when making decisions.

Atlanta Federal Reserve President Raphael Bostic said that officials should be cautious in their decision-making and lean towards maintaining high interest rates to achieve price stability, given the uneven progress in reducing inflation. Bostic also said he expects inflation to gradually fall to the Fed's 2% target this year. He added that price pressures are expected to ease, although at times progress may appear to be stalled, or inflation may worsen. He said, "Given the uncertainty of these measures, I believe this will require us to be more cautious in our policy tools." The Fed lowered interest rates for the third time in December last year, bringing the federal funds rate down by a full percentage point since September. However, at the same time, the Fed's dot plot released in December showed policymakers expect only two rate cuts this year, each by 25 basis points. Bostic said, "I want to make sure that we are getting the right signals and that our policies are calibrated based on the right signals. If we have to make a mistake, I would rather make it on the side of being good. I want to ensure that inflation reaches 2%, which means we may have to keep policy rates higher than what people expect." Fed Governor Lisa Cook expressed similar views to Bostic on Monday. Cook said policymakers could be more cautious in lowering rates because the labor market is strong and inflation pressures remain persistent. Cook said, "Since September last year, the resilience of the labor market has improved, and inflation stickiness is greater than I had imagined at the time. Therefore, I believe we can be more cautious in further rate cuts." Cook added, "I have always envisioned taking quicker action in the early stages of accommodative policy, and then gradually easing as policy rates approach neutral." "Over time, I still think that adjusting policy rates towards a more neutral stance may be appropriate." Cook also said that the U.S. economy is in a "good state" at the beginning of this year. She believes that with the relatively low unemployment rate, wage growth exceeding inflation, and stable employment situations, the economy is stable. When commenting on the significant cooling of price growth in recent years, Cook said, "There is still a long way to go to achieve the 2% inflation target. I still believe that inflation will gradually - even if imbalanced - return to the 2% target in a sustainable manner."