Bostic says short-run inflation expectations encouraging, long-term ones are not
Raphael Bostic separates near-term and long-term inflation expectations, a week after the Federal Reserve's first rate increase since 2023.
Published
Raphael Bostic said short-run inflation expectations have been encouraging, but long-term expectations have not.
His remarks come a week after the Federal Reserve raised interest rates for the first time since 2023. Markets are now pricing two more hikes, following comments from Michael Barr. Barr has said further rate increases are likely needed to reach the Fed's 2% inflation goal, arguing that inflation risks now outweigh concerns about the labor market. He is one of a growing number of Fed officials pointing to more tightening since last week's quarter-point move.
John Williams has said that expectations of real interest rates are a major factor behind higher bond yields.
Bostic's split view fits that broader message. Short-run expectations holding steady is welcome, but the drift higher in long-term expectations keeps the case for further rate hikes intact, in line with Vice Chair Musalem's view that additional tightening is likely needed. On near-term direction, Bostic's comments read as neutral.