The talks about potential rate cuts in 2023 are gaining traction, but it seems that not everyone is on the same page. Raphael Bostic represents the Federal Reserve Bank of Atlanta & he is not expecting any rate cuts at least for this year.
According to Raphael Bostic, the reason for no rate cuts in 2023 is that there's very little chance that inflation will go down! In fact, he added that the Fed may have to raise the interest rates even higher to combat inflation.
He added that although a lot of progress has been made to tame inflation, it is still not enough. Bostic believes that the path to taming inflation is still a long way to go.
For now, the Fed's plan is to bring down the inflation to its 2% target, while the inflation in the USA now stands at 4.93%. If we look at the difference, inflation is still 2.93% higher than the target set by the Fed!
Bostic also said that if he had to choose between raising or not raising interest rates, he would join the first cut. Through these statements, Bostic made it clear that he is opposed to cutting the interest rate at this age.
However, we also need to account for the fact that interest rates have a lagging effect on the economy. This also includes inflation as well which is coming down in a slow & gradual manner. So if the Fed continues to raise the interest rates without any second thoughts, it would cause some serious damage to the US economy.
For now, it appears that the agenda for the next Fed meeting will be to determine whether there will be a rate hike or no rate hike. Another possibility is that of a rate cut, but the chances of that are very slim.