Fed Chair Powell testifies before House Financial Services Committee
Federal Reserve Chairman Jerome Powell testifies before House Financial Services Committee.
Atlanta Federal Reserve President Raphael Bostic warned Thursday that he believes tariffs are likely to cause a prolonged stretch of inflation as opposed to a one-time spike in costs.
Rather than "a short and simple one-time shift in prices, as standard textbook models would suggest," Bostic said he expects changes in U.S. trade policy along with concurrent geopolitical developments to lead to "a longer period of elevated inflation" over the course of a year or more.
Amid mounting pressure from President Donald Trump on the Fed to loosen its monetary policy position, Bostic firmly backed Federal Reserve Chairman Jerome Powell’s comments from Tuesday that the central bank should wait to adjust its policy stance as it continues to track how tariffs might impact prices.
Atlanta Federal Reserve President Raphael Bostic said he expects changes in U.S. trade policy along with concurrent geopolitical developments to lead to "a longer period of elevated inflation" over the course of a year or more. (Photographer: Valerie Plesch/Bloomberg via Getty Images / Getty Images)
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Bostic, who is not a voting member of the central bank’s rate-setting Federal Open Market Committee (FOMC), said the current period marked by economic uncertainty is "no time for significant shifts in monetary policy."
The next FOMC meeting is July 29-30. Trump’s 90-day pause on the sweeping "reciprocal tariffs" he announced on April 2 is set to expire on July 9. Treasury Secretary Scott Bessent told Gxstocks’ "Mornings with Maria" on Thursday that he expects "a flurry of deals" to be announced before next week’s deadline.
Inflation readings from March, April and May 2025 showed levels of inflation hovering slightly above the Fed’s 2% target, which Bostic said showed tariffs "had not substantially affected consumer prices." Yet Bostic said he believed rosy data in recent months reflected "firms’ strategies to delay substantive price increases" until final tariff rates are set, rather than evidence that the economy had staved off tariff-related price pressures.
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The Atlanta Fed chief’s comments at a lecture in Frankfurt, Germany, came hours after Thursday’s June unemployment report showed that hiring for the month outpaced expectations, with the economy adding 147,000 jobs and the unemployment rate ticking down to 4.1%.
The Fed has held interest rates steady since December 2024, when the central bank cut its target range by a quarter of a percentage point amid what then seemed to markets like a rate-cutting cycle that was bound to continue.
Federal Reserve Chair Jerome Powell said Tuesday that he believes the central bank would have continued to cut interest rates had tariffs not been implemented. (REUTERS/Amanda Andrade-Rhoades/File Photo / Reuters Photos)
Powell said Tuesday that he believes the Fed would have continued to cut interest rates had tariffs not been implemented, adding that "we went on hold when we saw the size of the tariffs."
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Bostic’s calls for patience on monetary policy moves echoed Richmond Federal Reserve President Tom Barkin’s assessment of the central bank's position Wednesday.
In an interview with Gxstocks’ "The Claman Countdown," Barkin compared the Fed’s efforts to discern tariffs’ impact on the economy to "driving through fog," a metaphor he has used since March to describe the difficulty facing the FOMC.
Bostic’s calls for patience on monetary policy moves echoed Richmond Federal Reserve President Tom Barkin’s assessment of the central bank's position Wednesday. (Photographer: Valerie Plesch/Bloomberg via Getty Images / Getty Images)
"You don't know what the impact of policy is going to be on the economy," Barkin said. "And so long as there's no urgency from the bigger environment, I think one does what one does when you drive through fog, which is go slowly."
