Atlanta Fed President Raphael Bostic stated that given the uneven progress in reducing inflation, officials should act cautiously in making policy decisions and should lean towards keeping interest rates high to achieve the goal of price stability.

In a podcast recorded on December 9 of last year and released this Tuesday, Bostic also indicated that he expects inflation to gradually decrease to the Federal Reserve's 2% target this year. He mentioned that he anticipates price pressures will ease, although at times, it may seem that progress could stagnate, or inflation momentum could intensify.

The speech was recorded before the FOMC policy meeting held on December 17-18, where Bostic stated, 'Given the volatility of inflation indicators, I believe this will require our policy stance to be more cautious.'

Last month, Federal Reserve officials cut rates for the third consecutive time, lowering the benchmark rate by a full percentage point since September last year. Bostic voted in favor of this decision. The median forecast released at the December meeting indicated that policymakers expect only two rate cuts of 25 basis points this year.

"I want to ensure that we are getting the right signals and that our policy is calibrated based on the right signals. If we have to make a mistake, I would rather err on the upside (in predicting inflation)," Bostic said in the podcast. "I want to ensure that inflation reaches 2%, which means we may need to keep policy rates higher for longer than people expect."

Federal Reserve Chair Powell has stated that in deciding future rate adjustments, officials will seek further progress on inflation. Other officials, including Fed Governor Lisa Cook, have indicated that policymakers can be more cautious in cutting rates and pointed out the strength of the labor market and the current state of inflationary pressures.

Before recording the podcast earlier last month, Bostic stated that the labor market is stable. He also mentioned that despite some volatility in the data, he believes inflation is on a sustainable path toward the Federal Reserve's 2% target.

On Tuesday, U.S. stocks fell after a series of optimistic economic data raised concerns that a rebound in inflation could slow the Federal Reserve's pace of monetary policy easing. A report from the U.S. Labor Department showed that job openings unexpectedly increased in November, while another report indicated that service sector activity accelerated in December, with a measure of input prices soaring to a near two-year high.

According to the Federal Reserve Watch tool from the CME Group, traders now believe the Fed is more likely to cut rates next in June and remain on hold for the rest of 2025. Investors are also concerned about the potential tariffs that the incoming Trump administration may impose, which could affect consumer prices.

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