Atlanta Fed President Raphael Bostic says the U.S. economy may only need one rate cut this year, as inflation pressures and trade tariffs raise new concerns.
Inflation Concerns Prompt Caution on Rate Cuts
Federal Reserve official Raphael Bostic shared his views on interest rates during a CNBC interview on Monday, May 19, 2025. The Atlanta Fed President said he's now leaning toward only one rate cut this year, even though the central bank previously expected two.
Bostic explained that the economy is still feeling the impact of higher-than-expected tariffs, which could make inflation worse. Because of this, he believes the Federal Reserve should move more slowly and carefully when deciding how many rate cuts to make.
Tariffs Making Inflation Worse
One of the main reasons Bostic is cautious about cutting rates is the ongoing tariff situation. Tariffs are taxes placed on imports, and they often lead to higher prices for consumers. Recently, tariffs have gone up more than the Fed expected earlier in the year.
“These tariffs are definitely economically significant,” Bostic said. He pointed out that the effects of these tariffs are still unfolding, and it will take more time to fully understand their impact on the economy.
President Donald Trump had announced tariffs on nearly every major trading partner in April. While there was a temporary 90-day pause that set many tariffs at 10%, the pressure remains. Even though the U.S. reached a limited truce with China, tariffs are still higher than they were before Trump took office.
Fed Balancing Inflation and Jobs
The Federal Reserve’s job is to balance two goals: keeping prices stable (controlling inflation) and supporting maximum employment (helping people find and keep jobs). Right now, Bostic says inflation is his biggest concern.
“I worry a lot about the inflation side,” he said. “We’re seeing expectations move in a troublesome way, and that will make our job harder.”
When people expect prices to keep rising, it can create a cycle where businesses raise prices and workers demand higher wages. That makes inflation even harder to control. For this reason, Bostic believes the Fed must be very cautious when considering any rate cuts.
One Rate Cut More Likely Than Two
In March, the Federal Reserve had projected two small rate cuts in 2025. But Bostic now believes just one cut is more likely. He said that it will take time for the economy to settle, and until there’s more clarity, the Fed should not rush into more aggressive rate reductions.
“I’m leaning much more into one cut this year,” Bostic said, “because I think it will take time, and then we’ll sort of have to see.”
Bostic’s Role in the Fed
It’s important to note that Bostic is not currently a voting member of the Federal Open Market Committee (FOMC). This committee is responsible for setting interest rate policies. However, as a regional Fed president, Bostic still plays an important role in shaping the discussion and providing insight into regional economic conditions.
His views give us a window into how Fed officials are thinking, especially as inflation and tariffs continue to shape the economic outlook.
Market Implications of Slower Rate Cuts
If the Fed decides to move forward with only one rate cut, it may affect financial markets. Investors who were expecting two cuts might need to adjust their strategies. A slower pace of rate cuts usually signals that the Fed is more concerned about inflation than it is about boosting economic growth.
This could keep interest rates higher for longer, affecting loans, mortgages, and investment decisions. Traders will be paying close attention to future Fed speeches and data releases to see if more officials agree with Bostic’s cautious stance.
Conclusion
Raphael Bostic’s latest comments show a more careful approach to monetary policy. With inflation still a concern and trade tariffs adding uncertainty, the Fed may hold off on multiple rate cuts in 2025.
While earlier forecasts suggested two cuts, Bostic now sees one as more realistic. His remarks serve as a reminder that the Federal Reserve’s path depends on a careful balance of inflation pressures, job market strength, and global trade developments.
