Fed's Bostic: Inflation is expected to decline but warns Fed to be cautious

Federal Reserve Bank of Atlanta President Raphael Bostic said on Tuesday that Fed officials should be cautious with policy decisions given uneven progress on lowering inflation and err on the side of keeping interest rates elevated to achieve their price stability goals, per Bloomberg.  

Key quotes

Given that kind of bumpiness in the measures, I think that will call for our policy approach to be more cautious.

I want to make sure we get the right signal, and make sure that our policy is calibrated to that right signal. And if we've got to err, I would err on the upside. 

I would want to make sure -- for sure -- that inflation gets to 2%, which means we may have to keep our policy rate higher longer than people might expect.

Inflation trends might show periods of stalling or more aggressive movement, reflecting variability in the data.

Ensuring policy aligns with reliable signals, even amid variability, is a key focus.

Preference to err on maintaining higher rates longer to ensure inflation reaches the 2% target.

Policy rate reductions may be slower or delayed to ensure consistent progress toward inflation goals.

Rates will likely remain elevated longer than originally anticipated to achieve the inflation target. 

Market reaction

The US Dollar Index (DXY) is trading 0.02% lower on the day at 108.68, as of writing.