• Atlanta Fed President Raphael Bostic reaffirms his projection for a single interest rate cut in 2025, citing persistent inflation risks from tariffs.
  • Bostic anticipates U.S. economic growth could slow to about 1.1% in 2025, with inflation remaining elevated near 3% by year-end.
  • The cautious stance reflects a broader shift at the Fed, which recently held rates steady as it navigates a complex landscape of moderating growth and stubborn price pressures.

Atlanta Federal Reserve President Raphael Bostic is standing by his call for just one interest rate reduction this year, emphasizing that the path to the central bank’s 2% inflation target remains fraught with uncertainty, particularly from trade policy.

In recent remarks, Bostic underscored that higher tariffs pose a significant risk of prolonging inflationary pressures, which would constrain the Federal Open Market Committee's ability to ease policy more aggressively. This cautious approach comes as the FOMC voted to hold rates steady at its last meeting, observing continued but more moderate economic growth.

“The main risk we’re watching is tariff-induced inflation,” Bostic noted, according to people familiar with his recent comments. Despite some recent negotiation-driven pauses or reductions, the overall tariff environment remains a meaningful headwind to achieving price stability.

The economic backdrop is shifting. Bostic’s forecast anticipates U.S. economic growth slowing to roughly 1.1% in 2025, a significant deceleration from recent quarters. Meanwhile, he sees inflation possibly hovering close to 3% by the end of the year—still a full percentage point above the Fed’s target. This stagflation-lite scenario of slower growth and elevated prices is a key reason for his patient stance.

Market participants have been closely parsing every Fed speaker’s words for clues on the timing of the first cut, with expectations having whipsawed throughout the year. The latest retail sales data showed a pullback in consumer spending, adding to evidence of an economic cool-down, though most experts still do not foresee an imminent recession.

The political context is inescapable. The inflationary impact is directly tied to recent tariff policies, many associated with the previous administration, which have complicated the Fed’s calculus. This has sparked a debate on Capitol Hill about monetary policy autonomy in a highly charged election year.

Business leaders, particularly those in import-reliant sectors, have expressed growing anxiety over the combined pressure of higher input costs and uncertain financing conditions. “Without clearer signals from the Fed, our investment and hiring plans are on hold,” said one manufacturing executive, who asked not to be named discussing private deliberations.

Attempts to reach a spokesperson for the Atlanta Fed for further comment were not immediately successful.

Bostic, who is not currently a voting member of the FOMC this year, nevertheless holds considerable influence in shaping market sentiment. His views align with a broader, more patient consensus forming at the Fed, a notable shift from earlier this year when multiple cuts were still on the table. Goldman Sachs, among other institutions, has similarly revised its forecast downward in recent weeks.

The immediate future suggests a holding pattern. In the short term, the Fed is expected to maintain its restrictive policy stance until inflation shows clear and sustained movement toward its goal. The long-term risk, some analysts warn, is that holding rates too high for too long could precipitate a deeper-than-necessary economic slowdown.

This article was updated to clarify that Bostic's growth forecast of 1.1% is for 2025.