Federal Reserve Bank of Atlanta President Raphael Bostic is signaling a longer runway before the Fed begins easing monetary policy, citing a convergence of macroeconomic uncertainties that could force the central bank to hold interest rates steady for an extended period.
Speaking at the Atlanta Fed’s Financial Markets Conference on Amelia Island, Florida, Bostic reaffirmed his support for a cautious, data-dependent approach. But in contrast to expectations earlier in the year that pointed to a near-term pivot, Bostic suggested that recent developments—particularly in trade policy, fiscal dynamics, and foreign capital flows—have injected new complications into the Fed’s decision-making calculus.
“These evolving risks may push out the timing for returning to a more normalized policy stance,” Bostic said. “We need to give these issues time to resolve before we act with conviction.”
Among the key factors Bostic highlighted:
1. Trade Policy Volatility:
Recent tariff escalations, particularly those associated with President Trump’s Liberation Day measures, have already begun reshaping business sentiment. While some of the more aggressive tariffs have been temporarily suspended, Bostic warned that overall trade restrictions remain elevated compared to early April levels—and their full economic consequences are still materializing.
“Markets may be reacting to temporary relief, but the cumulative impact of sustained trade barriers hasn’t worked through the system yet,” Bostic noted.
2. Fiscal Uncertainty and Tax Policy:
Proposals for additional tax cuts, coupled with Moody’s recent downgrade of U.S. sovereign credit, are muddying the economic outlook. Bostic emphasized that businesses and households are struggling to form a coherent view of where policy is headed, creating a drag on capital investment and consumption planning.
“Economic actors don’t have a strong conviction on where the economy is headed,” he said. “That makes it harder for us at the Fed to determine where the fundamentals truly lie and how policy should adjust.”
3. Declining Foreign Demand for U.S. Assets:
The retreat of foreign investors from U.S. fixed income markets is another growing concern. With global capital flows shifting amid geopolitical tensions and protectionist trends, the Fed faces added complexity in assessing the resilience of financial conditions. This erosion in foreign demand could also put upward pressure on long-term yields, complicating the Fed’s efforts to maintain accommodative conditions.
Bostic, who is not a voting member of the FOMC this year, told reporters that while he still anticipates one rate cut in 2025, the timeline is uncertain. He said it may take another six months to fully evaluate the effects of tariff policy and other fiscal initiatives on inflation and growth.
In the meantime, Bostic stressed the need for patience and vigilance. Businesses, he said, are growing increasingly cautious—delaying capital expenditures, slowing hiring plans, and withholding forward guidance as they assess the durability of current conditions. That hesitancy, in turn, could dampen economic momentum and introduce downside risks to growth.
“We’re seeing signs that decision-makers are holding back,” Bostic said. “In an environment of uncertainty, firms are reluctant to commit resources without clearer signals.”
For wealth advisors and RIAs, Bostic’s comments reinforce the idea that the Fed is unlikely to pivot aggressively unless economic clarity improves meaningfully. Inflation remains sticky in some segments, while growth indicators have shown uneven performance. The first quarter of 2025 saw a mild contraction in GDP, and although forward estimates still point to modest expansion, the confidence necessary to sustain that trajectory is fragile.
The broader takeaway for advisors is that markets may remain range-bound as monetary policy stays in limbo. Fixed income allocations may warrant ongoing scrutiny, particularly with yield curve distortions and diminished international demand influencing Treasury pricing. Meanwhile, equity market valuations could face headwinds if interest rates remain elevated and business investment slows.
Bostic’s tone also suggests that Fed officials are acutely aware of the need to balance restraint with responsiveness. “You can’t pause forever,” he said, acknowledging that a prolonged holding pattern could create its own set of distortions or signal policy inertia.
Still, for now, Bostic appears firmly in the wait-and-see camp. His message to markets: don’t expect rate cuts until the noise clears and the Fed regains visibility on trade, taxes, and capital flows.
“We have to stay very vigilant in monitoring where businesses are, where families are, and how they’re adapting,” he said. “Only then can we shape policy that’s truly responsive to the evolving landscape.”
