Atlanta Fed’s Bostic Discusses FOMC’s Move to Lower Fed Funds Rate

On September 17, the Federal Open Market Committee (FOMC) voted for the first interest rate cut of 2025, and participants have submitted a wide range of forecasts for the path of interest rates through the end of this year.

Atlanta Fed president Raphael Bostic said during a September 19 interview with The Wall Street Journal that he was "fine" with the rate cut, given that he has penciled in one rate cut for the year-though his outlook on rates remains data dependent.

"I had one cut for this year" in the economic projections turned in before the meeting, Bostic said in the interview published September 22. "I didn't say the timing for that. This could easily be the one cut. And so, for that, I'm fine with it."

Bostic added, though, that he hasn't added any additional cuts to his forecast. "I think, moving forward, the data is going to be really important and here's what I would say: forecasting is really hard these days," he said.

Bostic does not currently cast a vote on monetary policy matters because of the rotation schedule for voting by presidents of Federal Reserve Banks, though he provides information about the southeastern economy and participates in the FOMC's deliberations on the economy and policy options.

The FOMC voted 11-1 on September 17 to reduce its short-term interest rate-which influences the rates lenders charge for credit card balances, vehicle loans, and other borrowing-by a quarter-point, to 4 to 4-1/4 percent, making it the first rate reduction since December 2024. The FOMC had held rates at a level Fed chair Jerome Powell has described as restrictive. The goal was to bring the inflation rate to the Fed's target of 2 percent, down from a persistent rate of about 2.5 percent.

Newly installed Fed governor Stephen I. Miran cast the lone dissenting vote on the interest rate reduction. Miran preferred to lower the target range for the federal funds rate by a half a percentage point at this meeting. Miran was sworn in as a member of the Fed's Board of Governors on September 16, in time to participate in the FOMC's deliberations that day and the rate-setting action the following day.

The range of forecasts for interest rates reported by FOMC participants highlights the difficulty of creating a consensus for monetary policy in this time of economic uncertainty. The economic effects of tariffs, immigration policies, and other federal actions continue to evolve. Meantime, the Fed faces a growing tension between a rate of inflation that runs persistently higher than the Fed's target of 2 percent and a labor market that Atlanta Fed research shows to be cooling but not collapsing.

FOMC participants who think inflation is the greater risk to the economy contend that interest rates should be set at a level high enough to slow the economy. Participants who think employment conditions present the graver risk contend interest rates should be cut to spur economic activity that will spark job creation. This tension is inherent within the Fed's congressionally established dual mandate, which calls for the central bank to induce sustainable maximum employment and price stability.

"I think there's a debate about the balance of risks, and I will acknowledge that the risks have shifted," Bostic told The Wall Street Journal. "But for me, the risk to the price-stability mandate is still the most significant. We are not at target. We're still a ways from it. We get signs from our contacts and from our surveys that prices are likely to still go up some more from here. So we're going to see upward movement in inflation. I worry about that."

Employment is a lesser concern than inflation right now, Bostic indicated. "There may be some weakening, but no one is expecting dramatic changes on the employment side," Bostic said. "I don't think the labor market is in crisis right now. I think that there is a fair amount of uncertainty, and businesses have been telling us basically one thing for the whole year, which is they're not hiring and they're not firing and they're waiting to see how things shake out on the policy side-because that'll determine how businesses are engaged with their customers and what customers are going to be wanting to buy and willing to buy."

By the end of this year, nine of the 19 FOMC participants expect an additional half-point reduction in the overnight rate, moving the rate to 3-1/2 to 3-3/4 percent from the newly set rate of 4 to 4-1/4 percent. Two of the 19 participants expect a rate of 3-3/4 to 4 percent. One participant expects the rate to be from 2-3/4 to 3 percent. Seven of the 19 participants expect the rate will remain at or just above 4 percent.

Bostic said his posture is to hold on the one rate cut approved September 17, even while continuing to monitor incoming data that include an employment report expected in October, supplemented by Atlanta Fed surveys and data collected from the Bank's wide network of regional business leaders.

The FOMC members revealed their thoughts about the path of interest rates through submissions to the Summary of Economic Projections (SEP). The SEP is published quarterly (the latest edition came out the same day as the latest policy announcement) and contains the participants' projections on the most likely outcome for economic indicators including real gross domestic product growth, the unemployment rate, and inflation for 2025 through 2028 and over the longer run.

"In many regards, I think this is one of the most difficult economic periods that I've had to think about doing policy in because both risks are rising, and there is some balance that we're starting to hear," Bostic said.

Read the Federal Reserve'sFOMC statement, issued September 17.

Watch Fed chair Jerome Powell's September 17 press conference, or read the transcript.

Read the Summary of Economic Projections, issued September 17.

Read Bostic's September 3 quarterly essay, Focusing on Fundamentals Amid Great Complexity.

Read or watch Bostic's July 3 presentation to the Institute for Monetary and Financial Stability, in Frankfurt, Germany, "The Dual Mandate and the Primacy of Inflation Expectations."