Bostic: Tariffs could lead to continued inflation. The Fed may cut interest rates only once this year.

Raphael Bostic, President of the Atlanta Fed, stated that the price increases caused by tariffs may be gradual rather than one-time, leading to sustained upward pressure on inflation. He also predicted that the Fed will only cut interest rates once this year. Bostic said on Monday, "The risks have seeped into the psyche of consumers and business leaders." There is a divergence of opinions among Fed officials on how tariffs will impact inflation. Forecasts released earlier this month at the Fed policy meeting showed that 10 officials are overlooking the price impact of tariffs and expect at least two rate cuts this year. However, 7 officials indicated that there will be no rate cuts this year, suggesting they are more concerned that tariffs may lead to more prolonged price pressures. Fed governors Christopher Waller and Michelle Bowman have previously said that if inflation remains moderate, they would support a rate cut as early as July. But many officials have dismissed this idea, saying they expect to keep rates stable until fall to assess the extent of tariffs' impact on inflation. Bostic said on Monday that the approach of addressing issues by analyzing supply shocks may not be applicable this time, adding that officials need to closely monitor globalization trends and the shift in production patterns in low-cost regions for potential impacts on inflation and the economy. Bostic stated that he expects one rate cut this year, three in 2026, but noted that these forecasts are subject to significant uncertainty. He also projected that inflation will eventually return to the 2% level without the need for any rate hikes. Bostic reiterated his view that there is currently not enough information to consider adjusting rates. He said the Fed has the "luxury" to wait for more information, as the labor market in the U.S. still appears solid. However, he made it clear that he expects prices to rise and cited a survey from the Atlanta Fed Bank indicating that businesses expect to pass on the costs of tariffs to customers. Bostic said, "I do think there will actually be more pricing actions taken, the key is just when and not whether."