Fed’s Bostic says tariffs effects may take a year ’to fully play out’

Investing.com -- Atlanta Federal Reserve President Raphael Bostic indicated Thursday that the U.S. economy will likely experience a prolonged period of elevated inflation, suggesting the central bank should maintain its current monetary policy stance.

In prepared remarks for an economic conference in Germany, Bostic explained that adjustments to changes in trade policies, other U.S. policies, and geopolitical developments would not result in a simple one-time shift in prices as standard economic models might suggest.

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"Instead, this increasingly looks like a process that may take a year or more to fully play out," Bostic said.

He warned that this extended inflation period could potentially influence consumer psychology and inflation expectations, creating more significant challenges for the Federal Reserve.

Bostic noted that new economic data released Thursday showed stronger-than-expected job creation and a slight decrease in the unemployment rate to 4.1%, indicating "labor market conditions remain broadly healthy." He added that the job market is not yet showing signs of deterioration that would justify preemptive interest rate cuts.

Given the high level of uncertainty surrounding jobs, economic growth, and inflation, Bostic argued that "this is no time for significant shifts in monetary policy." He endorsed the Federal Open Market Committee’s current "wait and see" approach.

The Federal Reserve has maintained its policy interest rate unchanged since December, despite calls from President Donald Trump for immediate and substantial rate reductions.

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