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Investing.com -- Federal Reserve Bank of Atlanta President, Raphael Bostic, recently shed light on his economic outlook, highlighting that while conditions appear generally healthy, uncertainties and risks persist for price stability and the labor market.
Bostic noted that despite some market volatility, progress toward price stability has not completely halted. Housing prices have been a significant factor in the persistent inflation, but market-based measures of rental price growth have been more subdued than official inflation statistics. This suggests that the softening in market rents should eventually reflect in the inflation statistics.
In terms of monetary policy, Bostic’s strategy will involve close observation of incoming data, information from the Atlanta Fed’s surveys, the balance of risks, and input from the Bank’s business contacts. The Federal Open Market Committee, in its last meeting in January, maintained the federal funds rate target at a range of 4-1/4 to 4-1/2 percent, following a reduction of a full percentage point over the last three meetings of 2024.
Bostic supported the reduction in monetary policy restrictiveness, citing a shift in the balance of risks to the dual mandate of price stability and maximum employment. Inflation has declined significantly, from above 7 percent in mid-2022 to under 3 percent per the 12-month change in the personal consumption expenditures price index. However, inflation remains above target, and price stability is no longer the urgent concern it once was, especially considering a cooling, yet solid labor market.
On the labor front, Bostic described the employment outlook as stable, but with accumulating signs of slowing. Despite considerable progress, the goal of bringing inflation to the Committee’s 2 percent target is not yet complete, and additional threats to price stability may emerge. The economy also faces heightened uncertainty, with potential shifts in economic, trade, and immigration policy that could impact both prices and labor markets.
In terms of employment, monthly payroll employment growth has been strong, averaging 237,000 over the three months through January. Layoffs remain rare, and the unemployment rate of 4 percent in January, while higher than 2022 and 2023 levels, is still healthy by historical standards. However, there are indicators of labor market softening, with it being harder for unemployed workers to find jobs than last summer, and job finding probabilities now lower than they were prepandemic.
Bostic remains confident that inflation will eventually settle to 2 percent, despite the bumpy course. He noted that recent inflation data have provided evidence for both optimism and pessimism. On the positive side, longer-term inflation expectations are mostly at healthy levels. However, the proportion of goods and services whose prices rise 3 percent or more year-over-year remains above prepandemic levels.
Uncertainty is a key theme in early 2025, with gauges of uncertainty having climbed steeply late last year. Business contacts have expressed both enthusiasm and apprehension about potential changes in tax, regulatory, trade, and immigration policies. These uncertainties add complexity to policymaking and contribute to the economic outlook.
The Federal Reserve Board of Governors conducts a comprehensive review of policy strategy, tools, and communications every five years, and announced another such review last November. Bostic looks forward to the review, which will provide an opportunity to hear from a diverse range of public voices.
In conclusion, Bostic stated that the economy is strong, monetary policy is well positioned, and the current ambiguity calls for caution and humility in working to achieve price stability and maximum employment for the American people.
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