Federal Reserve Bank of Atlanta President Raphael Bostic stated that, given the uneven progress in reducing inflation, officials should act cautiously when making policy decisions and should lean towards maintaining high interest rates to achieve the goal of price stability.

In a podcast recorded on December 9 last year and released this Tuesday, Bostic also stated that he expects inflation to continue to gradually decline to the Fed's 2% target this year. He said he anticipates that price pressures will ease, although at times it may seem that progress could stall or inflation momentum could become more intense.

The speech was recorded before the FOMC policy meeting held on December 17-18. Bostic said, "Given the volatility of inflation indicators, I think this will require our policy stance to be more cautious."

Federal Reserve officials lowered interest rates for the third consecutive time last month, cutting the benchmark rate by a full percentage point since September of last year. Bostic voted in favor of this decision. The median forecast released at the December meeting indicated that policymakers expect only two rate cuts of 25 basis points this year.

"I want to ensure we are getting the right signals and that our policy is calibrated based on the right signals. If we must make a mistake, I would prefer to err on the side of (forecasting inflation) being upside," Bostic said in the podcast. "I want to ensure, confirm that the inflation rate can reach 2%, which means that we may need to keep policy interest rates higher for longer than people expect."

Federal Reserve Chairman Jerome Powell has stated that officials will seek further progress on inflation when deciding on future interest rate adjustments. Other officials, including Fed Governor Lisa Cook, have indicated that policymakers can be more cautious in easing rates, citing a strong labor market and the current sticky inflation situation.

Before recording the podcast earlier this month, Bostic stated that the labor market is stable. He also mentioned that despite some volatility in the data, he believes inflation is on a sustainable path towards the Fed's 2% target.

On Tuesday, U.S. stocks fell after a series of optimistic economic data raised concerns that a rebound in inflation could slow the Fed's pace of monetary easing. A report from the U.S. Department of Labor showed that the number of job openings unexpectedly increased in November, while another report indicated that service sector activity accelerated in December, with a measure tracking input prices soaring to a nearly two-year high.

According to the FedWatch tool from the CME Group, traders now believe that the Fed is more likely to cut rates again in June and remain on hold for the rest of 2025. Investors are also concerned about tariffs that might be imposed by the incoming Trump administration affecting consumer prices.

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