Fed’s Bostic: Higher inflation on the cards

Federal Reserve Bank of Atlanta President Raphael Bostic said on Thursday that the US economy is likely to face a protracted period of adjustment in response to new trade and policy dynamics, warning it “will not be short or simple” and could extend over a year or more.

Key Quotes

• Adjustment of prices to trade and other policies will not be short or simple; it could take a year or more.
• The labour market remains healthy; we do not see signs of serious deterioration.
• The US is likely going to see a period of higher inflation readings.
• Not the right time to shift monetary policy given uncertainty.
• The "wait and see" approach regarding interest rates remains appropriate, particularly given the economy’s resilience.
• There is a risk that high inflation could begin to influence consumer psychology.
• The Fed should consider making a commitment to stable inflation expectations more explicit in its framework.
• Businesses are delaying hiring and investments; expect demand to stagnate or decline if costs continue rising.
• Recent sanguine inflation readings are a result of businesses delaying price increases to get clarity on final tariff levels.