Mortgage Rate Relief Likely Delayed Until Summer, Says Fed Official

According to Raphael Bostic, President of the Atlanta Fed, significant relief might not arrive until summer. In an interview with CNN on Monday, Bostic projected that the US inflation rate would taper to “the lower twos” by the year’s end, a decline from December’s 3.4%.

“Given this outlook, I anticipate the first rate adjustment to occur sometime during the summer months,” Bostic remarked.

Since March 2022, the Fed has incrementally increased interest rates to counter soaring inflation and moderate the fervent US economy following the relaxation of pandemic restrictions. While such hikes serve to dampen investment and spending, they also render debt—such as mortgages and credit card balances—more costly.

Acknowledging the impact of inflation on personal expenses, Bostic empathized, stating, “We, as Fed officials, experience the economy firsthand. We navigate grocery bills and fuel costs just like everyone else.”

However, Bostic emphasized that the reduction of interest rates hinges upon substantial evidence of inflation abatement. The US economy has sustained its vigor, evidenced by surpassing job growth predictions in January and fourth-quarter GDP expansion well beyond initial estimates, driving both spending and inflation.

“The crux lies in discerning how swiftly inflation can revert to the Fed’s 2% target,” Bostic explained, alluding to the Federal Reserve’s inflation goal.

In December, the Fed signaled three potential interest rate adjustments in 2024, sparking speculation among economists and analysts regarding the timing of the first cut.

Bloomberg reported that Goldman Sachs and Bank of America suggested an anticipation of cuts as early as March, but Fed Chair Jerome Powell dispelled such notions earlier this month, suggesting that March is an unlikely start for interest rate reductions.

Market attention is now fixed on the forthcoming US January inflation data, slated for release on Tuesday morning, which may provide further insights. The Federal Reserve Open Market Committee’s next session is scheduled for March 19 and 20, where monetary policy decisions will be deliberated.