Fed’s Bostic sees only one rate cut in 2025 as Trump demands immediate action again

Raphael Bostic, President of the Federal Reserve Bank of Atlanta, is backing away from the idea of two rate cuts this year. Now he’s saying there’s likely going to be just one rate cut in 2025. His reason? Tariffs.

He thinks the new tariffs are dragging out inflation and making it harder to bring prices down. That’s pushing everything back, including how long rates stay high. In an interview with Bloomberg on Monday, Bostic said:

“I moved to one mainly because I think we’re going to see inflation be very bumpy and not move dramatically and in a clear way to the 2% target.”

Bostic now expects inflation to hit that 2% target sometime in early 2027. That’s even later than what Fed officials thought in September when they were aiming for 2026. It’s now in line with the most recent Fed forecast.

The central bank also said last week that it still sees a half-point rate cut this year. That means two cuts of 25 basis points, same as the December forecast. But that’s just the median. A closer look shows more officials now expect either only one cut or none at all in 2025.

Trump ramps up pressure on Fed to cut now

While Bostic is holding off, Trump is not waiting. He pushed the Fed again on Monday to slash interest rates. He brought it up during a Cabinet meeting, saying, “Generally, prices are coming down, and energy prices are coming down, and I hope the Fed lowers interest rates, and then you get to see interest rates coming down.”

Last week, Trump also posted online that the Fed should start cutting now. He argued that if the Fed doesn’t act fast, his planned tariffs will hit harder. He’s not bluffing either — his team is getting ready to roll out a new wave of tariffs on April 2. Jerome Powell, the Fed Chair, said these tariffs are already hanging over the Fed’s economic forecasts. The whole situation is now a tug-of-war. Trump wants fast rate cuts before tariffs go live. Bostic and others at the Fed are stalling, waiting for inflation to drop.

Powell spoke last week too. He said the Fed will stay on hold for now. He also repeated that the economy is still on solid ground, even though consumer sentiment isn’t exactly great. Powell said the price jump from tariffs should be temporary. That’s his word — “transitory.” Yes, the same word the Fed used during the pandemic that turned out to be dead wrong. That’s what’s making this whole thing weird. They’re using “transitory” again like it means something different this time.

Powell and others are also ignoring recent University of Michigan surveys. Those showed long-term inflation expectations going up. But Powell brushed that off. He said other inflation indicators haven’t really moved, so he’s not worried.

Bostic warns inflation will stay messy and rates will stay high

Bostic doesn’t sound too confident either. He admitted this inflation problem is messy and not moving the way they want. “Because that’s being pushed back, I think the appropriate path for policy is also going to have to be pushed back in getting us to that neutral level,” he said. So don’t expect any fast changes.

He also talked about the impact of tariffs. Bostic said tariffs usually cause a one-time price spike, but now it could be worse. Inflation has already been high, so people are more sensitive now. “We’ve just gone through a period of elevated inflation so it’s very much on the consumer’s mind,” Bostic said. “I fear that they might be more sensitive to higher prices today than they have been in the past, but they might not, and we’ll just have to see how it plays out.”

Another thing Bostic said is that any future moves by the Fed might have to be bigger than usual. Since they’re on pause now, the next adjustment may need to be more aggressive. But he also said he wants to wait and see before doing anything. The Fed doesn’t want to act too soon, then reverse course if the economy shifts again.

Back in February, Bostic already said rates need to stay restrictive until inflation comes down more. And at last week’s policy meeting, the Fed decided to slow down how fast it’s shrinking its balance sheet.

Starting in April, they’ll let only $5 billion in Treasuries roll off each month, instead of $25 billion. That’s a big change in the pace of quantitative tightening. Bostic supports that. He wants the wind down to just continue slowly until it’s time to stop it completely. He’s not in favor of speeding it up again later.

Bostic also said he’s open to selling off the Fed’s mortgage-backed securities, but only if it won’t mess up the mortgage market or money markets. That part’s still just a thought — nothing decided yet.

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