Washington, D.C., December 16, 2025 – Raphael Bostic, President of the Federal Reserve Bank of Atlanta, cautioned that additional interest rate cuts in the United States could reignite inflation pressures and undermine the Fed’s credibility. In an essay published by the Atlanta Fed on Tuesday, Bostic emphasized that moving monetary policy into an accommodative stance could risk higher inflation expectations among businesses and consumers, potentially destabilizing the economy.

“Moving monetary policy near or into accommodative territory, which further federal funds rate cuts will do, risks exacerbating already elevated inflation and untethering the inflation expectations of businesses and consumers. That is not a risk I would choose to take right now,” Bostic wrote.

Current Economic Conditions

Bostic acknowledged signs of softening in the U.S. labor market, but did not foresee a severe downturn. He attributed part of the current labor dynamics to structural shifts, including:

• Technological innovations reshaping industries
• Changes in immigration flows
• Adjustments in payrolls after labor hoarding during the COVID-19 pandemic

“Careful analysis by economists on our staff suggests that the labor market is likely not at a negative inflection point,” Bostic said, noting that labor data remain ambiguous and largely sideways.

Inflation Outlook

Despite moderate employment pressures, inflation remains elevated, well above the Federal Reserve’s 2% target, and is unlikely to decline significantly until at least late 2026. Bostic projected that inflation could exceed 2.5% by the end of next year, warning that persistent above-target inflation poses a risk to the Fed’s credibility.

“Will the public lose faith after five years of above-target inflation? Six years? Nobody knows,” Bostic said. “But what we do know is that credibility is a cornerstone of effective monetary policy.”

He stressed that maintaining credibility is essential for the Fed to effectively anchor inflation expectations and ensure long-term economic stability.

Recent Fed Actions and Bostic’s View

The Federal Reserve recently cut the federal funds rate by a quarter of a percentage point, signaling a likely pause before further reductions. Bostic expressed skepticism about the necessity of last week’s cut, indicating that he does not foresee additional rate reductions in 2026, given his outlook for 2.5% economic growth and continued elevated price pressures.

Implications for Monetary Policy

Bostic’s comments highlight the delicate balancing act facing the Fed: stimulating growth while preventing inflation from becoming entrenched. Economists and investors are closely monitoring how the Fed’s actions and communications will influence:

• Consumer and business expectations of inflation
• Financial markets and borrowing costs
• Long-term credibility of U.S. monetary policy

The remarks underscore the Fed’s ongoing challenge of navigating economic growth, labor market shifts, and inflation dynamics in an increasingly complex global environment.