Current Date:February 22, 2025

Inflation assessment from four Fed officials! What are the expectations?

The US Federal Bank (FED) officials have a cautious stance in monetary policy due to recently increasing inflation expectations and ongoing economic uncertainties. The statements of the FED officials show that different approaches can be adopted on interest policy.

Bostic: Uncertainty continues, there may be two interest rate reductions in 2025

Atlanta FED President Raphael Bostic predicted that the FED could make two interest rate reductions in 2025. Bostic pointed out the uncertainties of trade and immigration policies that are expected to enter into force in the United States on the economy and said that interest decisions will be shaped depending on economic data. Bostic said that inflation has not entered a new upward trend, but changes in import taxes and migration policies have created an important uncertainty in the business world. Bostic emphasized that the FED should take into account a wide set of data while making its final decision on interest policy and pointed out that the current economic indicators gave both positive and negative signals.

MÜSALEM: The increase in inflation expectations can tighten monetary policy

St. Louis FED President Alberto Musalem pointed out that inflation expectations in the markets have increased. Therefore, he pointed out that this situation could further further tighten the monetary policy. Musalem emphasized that inflation expects to achieve 2 %target, but short -term expectations have increased significantly in the last three months. According to Musalem, if the inflation remains above the target, the FED may need to go beyond existing expectations. Although there are signs of slowdown in the labor market, price prints continued.

Barr: Loosening bank arrangements may pose a risk

Michael Barr, Vice President of the FED’s audit, warned the loosening of the regulations in the banking sector before leaving his post. Barr said that the loosening in financial regulations may leave banks more vulnerable against sudden economic shocks. Stating that international capital standards should be preserved, Barr stressed that the strict keeping the current regulatory frame is critical for the stability of the financial system. He stated that the surveillance policies for the banking sector will be continued.

Kugler: Interests are fixed to remain constant, inflation should reach 2 percent target.

Adriana Kugler, Fed Guvernörü argued that the current interest levels should be preserved. Stating that inflation is still a way to achieve 2 %target, Kugler said that this process is progressing wavy. Kugler said that the current level of interest rates creates a moderate restriction on the economy and that the downward risks in the employment market are reduced. However, emphasizing that the upward risks of inflation continue, Kugler drew attention to the effects of customs tariffs on prices. He said that the increase in import prices will affect consumer prices.

The statements of the FED officials show that a careful approach is adopted on monetary policy. While the increase in inflation expectations are kept at the current levels or to be directed to a tighter path, economic uncertainties keep the possibility of interest rate reduction alive. In the coming period, the Fed’s policies seem to be shaped in line with inflation data and global economic developments.

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