Atlanta Fed President: Expects the US economy to reach a rate-cutting state in the coming months

According to the financial news app Zhitong Finance, Atlanta Fed President Bostic said on Tuesday that he expects the U.S. economy to reach a state where interest rates can be lowered in the coming months, and he does not currently believe that an economic recession is imminent.

Bostic stated at a conference for African American finance professionals, "I hope that in the next few months, our economy will basically return to normal."

When specifically asked if the Fed will lower interest rates soon, Bostic said that policymakers want to ensure that inflation can sustainably return to the Fed's 2% inflation target. "If we start lowering rates and then have to raise them again, that would be very bad, right? That would bring about various uncertainties," Bostic said. "But lowering rates is inevitable. If the economy develops as I expect, your smiles will be bigger by the end of the year."

Bostic also mentioned that since the COVID-19 pandemic, the Fed has been working to bring the economy back to a state of supply-demand balance. "We have always known that this takes time," he said. "Fortunately, in the past three to four months, inflation has returned to the trajectory we saw in December last year. This gives me more confidence in achieving our goal of 2%."

With growing confidence in the decline of inflation, Bostic stated that he is now closely monitoring employment trends in the U.S. to ensure that the economy does not suddenly shift from an overheated labor market to a cold one. Currently, Bostic believes that the labor market is normalizing, but has not entered a recessionary phase.

He said, "A recession is not in my expectations. I believe the economy still has enough momentum to see a slowdown, but the labor market will not deteriorate to an extremely worrying extent."

Bostic expressed concern about the unemployment rate rising to 4.3%, but economists had previously believed that the natural unemployment rate was 4.4%, and falling below this level would trigger massive inflation. "That didn't happen, which was a huge surprise," he added, believing that the long-term low unemployment rate in the U.S. has become a norm. The recent rise in the unemployment rate is relative.

He also pointed out that in the past year, the unemployment rate has risen from 3.4% to 4.3%, while the U.S. economy has been adding about 200,000 jobs per month, far exceeding the natural replacement rate of labor force growth. At the same time, the labor supply is also increasing. "This is actually a good problem. People are starting to see opportunities and they are pursuing them."

Bostic mentioned that everyone has their own opinions on the Fed's actions. People will criticize, but he hopes the public knows and remembers that Fed members are "really not fools." "We are working hard. We have indeed done a lot of analysis, and the ideas we put forward are carefully considered and weigh many different factors."