(Reuters) -New policies under the Trump administration are placing the U.S. economy in “incredible flux,” Atlanta Federal Reserve Bank President Raphael Bostic said on Thursday, and he suggested it is unlikely that the Fed will have enough clarity to move on interest rates before late spring or summer.
“There’s a lot of transition that’s happening, and in the midst of this transition it’s hard to know exactly where things are going to land,” Bostic said at an event hosted by the Birmingham Business Journal. He ticked off a list that included tariffs, trade policy, unpredictable bounces in inflation, consumer sentiment that is turning negative, immigration policy and its impact on the labor force, energy policy, tax policy, federal spending and geopolitics.
“I’d be surprised if we got a lot of clarity before the late spring or into the summer,” he said. “We’ll have to just sort of really be patient.”
The Federal Reserve will hold its next policy-setting meeting on March 18-19. Policymakers are expected to keep short-term borrowing costs in their current 4.25%-4.50% range.
President Donald Trump, since his January inauguration, has introduced a series of tariff actions followed by partial rollbacks or reprieves that have whipsawed industry and financial markets and contributed to financial market bets on earlier and additional Fed rate cuts.
Interest-rate futures contracts are now pricing in a better-than-even chance that the Fed will resume cutting U.S. short-term borrowing costs in May, with two more reductions to follow over the course of the year. Fed officials at the end of last year had projected just two rate cuts this year.
Bostic said tariffs will mean higher prices at some point for American households, which are already struggling with elevated costs, though whether that translates to higher inflation “is an open question.”
Other policies under the new administration, like deregulation and energy production, are fueling business optimism, he said.
After the Fed cut rates by a full percentage point last year, Bostic said he began this year thinking that he would need some time to assess the state of the economy before supporting any further action.
“If I was waiting before to see and get a clear signal about where the economy is going to go, I’m definitely waiting now, because the directionality is very much up in the air,” Bostic said. “The question is, How is this all sorted out? And sort of what’s the sequence of things that get rolled out? What are the responses? And then how does it all add up?”
(Reporting by Ann Saphir; Editing by Leslie Adler)
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