Fed’s Bostic says rate cuts still possible in 2025: 'I am not taking anything off the table'

Atlanta Federal Reserve president Raphael Bostic told Yahoo Finance that interest rate cuts are still on the table this year as policymakers assess how the economy is evolving and digest new policies from the Trump administration.

"I am not taking anything off the table," Bostic said in a Wednesday interview. "I am not putting anything extra on the table."

The Fed kept its rates on hold at its meeting last month following three consecutive cuts as central bankers grew more cautious about the future path of inflation.

Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments

A hotter-than-expected inflation reading for January from the Consumer Price Index (CPI) reinforced that stance and made it much more likely that the Fed will keep rates on hold for the foreseeable future.

On a "core" basis, which strips out the more volatile costs of food and gas, prices in January climbed 0.4% over the prior month — higher than December's 0.2% monthly gain and the largest monthly rise since April 2023.

Core CPI prices also rose 3.3% over last year, marking an uptick from the 3.2% seen in December, which was the first time since July that year-over-year core CPI showed a deceleration in price growth.

Bostic said Wednesday that he never expected inflation to move in a “straight line” down to the Fed’s 2% target.

Following the hotter-than-expected numbers from January, "I think the biggest question right now is whether that data point represents a new trend or just a bump in the road, and that's what me and my team will be looking at over the next several months to make sure that we ... draw the right conclusion from those January numbers," Bostic added.

Markets are adjusting their expectations for what the Fed may do this year. After the latest CPI data rose more than forecast in January, traders reduced their prediction of 2025 rate cuts down to just one — and not until much later in the year.

Bostic said Wednesday he is not concerned the Fed has already gone too far with its easing cycle, which started last September and amounted to a full percentage point of reductions toward the end of 2024.

"I don’t think we have cut too much. We are still in a restrictive posture and that’s what we need."

Bostic also said he still thinks the Fed’s benchmark policy rate is high enough to bring inflation down.

"We couldn't wait until we got all the way to 2% to start reducing our rate. What we have done is appropriate."

Now "we have to see" what happens, he added, as the Trump administration considers an array of new tariffs, tax cuts, and steps to deregulate certain industries.