Atlanta Fed President warns of inflation stickiness and opposes rate cuts that are too rapid.

Raphael Bostic, president of the Federal Reserve Bank of Atlanta, stated that Federal Reserve policymakers should still focus on controlling inflation and warned that high price pressures could continue into next year, or even longer. Bostic revealed in an article published on Tuesday that at the Federal Open Market Committee (FOMC) meeting on December 9-10, he not only advocated for keeping interest rates unchanged, but also suggested keeping interest rates at the same level until 2026. He pointed out that multiple "tailwinds" currently present in the economy could continue to exert upward pressure on inflation. Although Bostic is not a voting member of the FOMC this year, at the December meeting, the majority of voting officials still supported a 25-basis-point rate cut. "After weighing various factors, I still believe that, compared to changes in the labor market, price stability is a clearer and more urgent risk," Bostic wrote. He stated that there is hardly any sign that inflation pressures will significantly ease before the latter part of 2026, and he anticipates that even by the end of 2026, the inflation rate will still be above 2.5%. Currently, there is significant difference of opinion within the Federal Reserve on the path of interest rates. Last week's rate cut was the third of this year, but faced opposition from three officials, including two regional Fed presidents who advocated for keeping interest rates unchanged, as well as Governor Lael Brainard who believed there should be a one-time 50-basis-point rate cut. In addition, six officials in the latest rate forecast implied they did not support the rate cut. According to the latest dot plot, the median forecast shows that Federal Reserve officials expect only one rate cut next year. However, this forecast was made before the delayed economic data released on Tuesday. The data showed that the US unemployment rate had risen to 4.6% in November. In comparison, financial market expectations are more aggressive, with futures pricing showing investors betting on two 25-basis-point rate cuts next year. Bostic pointed out that the multiple dissenting opinions at last week's meeting indicate that the policy decision was a "very close call." He acknowledged that labor demand is cooling off, but does not believe that a "serious downward shift in the labor market" is the most likely scenario. He stated that some companies expanded too rapidly after the pandemic and are now scaling back their workforce, while other companies are replacing some positions through technology, which are structural changes that cannot be solved solely by adjusting interest rates. Regarding inflation, Bostic cited a business survey from the Atlanta Fed that many businesses expect to "continue raising prices at least until 2026," and inflation pressures are not limited to industries directly affected by tariffs. He also warned that the "super core" service inflation, excluding housing, remains elevated and could keep overall inflation hovering near the 3% level in the long term. "If potential inflationary pressures persist in the coming months, I am concerned that the public and pricing agents will eventually doubt whether the FOMC can achieve its inflation target in a timely manner," Bostic said. In terms of his own future, Bostic announced last month that he will retire after his term ends at the end of February this year. As stipulated, the chairmen of the 12 regional Fed banks serve five-year terms and must be reappointed by the Federal Reserve Board of Governors. The Board has unanimously approved the reappointment of the other 11 regional Fed presidents last week, while the board of the Federal Reserve Bank of Atlanta announced on Monday that they have officially started the selection process for Bostic's successor. Regarding speculation from the outside that his retirement is related to evaluation pressure during the reappointment process, Bostic responded, "This is a decision I made myself, completely based on personal choice."