Fed’s Bostic: The US Economy May Face Prolonged Periods of Elevated Inflation

According to a report by Jinse Finance, Federal Reserve's Bostic stated on Thursday that high inflation in the United States may persist for some time, which could seep into consumer sentiment, and businesses may need a year or more to adapt to ongoing changes in trade and other policies. This suggests a reason for patience before cutting interest rates. He said, "The main takeaway is that the adjustment of prices and the broader economy to U.S. trade and other upcoming policies, as well as geopolitical developments, will not be a brief and simple one-time price change as standard textbook models suggest." "Instead, this increasingly appears to be a process that could take a year or longer to fully play out." "If I am correct, then the U.S. economy may experience a longer period of high inflation." Bostic noted, "I do not expect prices to surge dramatically, but rather to rise steadily," which could seep into consumers' inflation expectations and pose a greater challenge for the Federal Reserve. He also mentioned that the nonfarm payroll data released on Thursday showed job gains exceeding expectations and the unemployment rate dipping slightly to 4.1%, indicating that "the labor market remains generally healthy" and has not yet shown signs of deterioration that would require a preemptive rate cut. He stated that the current high uncertainty in employment, economic growth, and inflation trends means "this is not the time for a major shift in monetary policy," and he believes the FOMC's current wait-and-see approach remains appropriate.