• Businesses surveyed by the Federal Reserve anticipate raising prices "well into 2026" at rates "substantially more than 2%," according to Atlanta Fed President Raphael Bostic.
  • The persistent inflation expectations complicate the Fed's path forward after its second rate cut of 2025, with policymakers balancing price stability against emerging labor market weakness.
  • Bostic's comments come as he confirmed he will retire when his term ends in 2026, adding to leadership transitions at the central bank.

Firms across the United States are planning to continue raising prices at a pace significantly above the Federal Reserve's 2% target through at least 2026, according to survey data cited by Atlanta Fed President Raphael Bostic. The findings signal persistent inflationary pressures that could complicate the central bank's ability to continue cutting interest rates aggressively.

"What we're hearing from businesses is that they expect to be raising prices well into 2026, and by substantially more than 2%," Bostic said in remarks that underscore the ongoing challenge facing monetary policymakers. The Fed's preferred inflation gauge has remained above its target for nearly five years, creating what one committee member called "a credibility test" for the institution.

The survey results emerge at a delicate moment for monetary policy. The Federal Open Market Committee recently cut rates for the second time this year, lowering the federal funds target range to 3.75%-4%, yet officials remain divided on how quickly to proceed with additional easing. According to people familiar with the matter, some policymakers worry that cutting too quickly could reignite inflationary pressures, while others point to emerging weakness in employment data.

Bostic's assessment suggests that business inflation expectations are becoming entrenched, a concern for central bankers who view such expectations as self-fulfilling. The Atlanta Fed president, who will retire when his term ends in 2026, has consistently advocated for a gradual approach to rate cuts, arguing that moving too aggressively risks undoing progress on inflation.

The Fed's deliberations have been complicated by incomplete economic data due to the federal government shutdown that began October 1. Without key statistics on employment, consumer spending, and inflation, policymakers are relying more heavily on anecdotal evidence and business surveys like those cited by Bostic.

Market participants, meanwhile, continue to price in a faster pace of rate cuts than Fed officials have projected. While Wall Street expects rates to fall to 2.75%-3% by the end of 2026, the median forecast among FOMC members sits at 3.4%. This divergence creates potential for market volatility if the Fed maintains its cautious approach.

Efforts to reach representatives at the Atlanta Fed for additional comment on the survey methodology were unsuccessful. A search for Bostic's successor is underway, according to people familiar with the process, adding another layer of uncertainty to the Fed's leadership structure as it navigates these persistent inflation challenges.