This Fed President Says Tariff Inflation Could Last Longer. Why He Still Expects Just 1 Rate Cut This Year.

Atlanta Fed President Raphael Bostic said that softening employment data caused him to change his thinking about rate policy. (Natalie Behring/Bloomberg)

Atlanta Federal Reserve President Raphael Bostic said Thursday that he still expects the central bank to cut rates just once this year, despite growing signs that the labor market is losing steam and the fact that traders have priced in more aggressive easing.

“My outlook today is still one cut for the year,” Bostic said on a call with more than 200 Florida-based executives. While last week’s jobs report was a “surprise” particularly because of its steep revisions, he said, it hasn’t yet shifted his view of the economy.

The July jobs report delivered a jolt to policymakers and markets alike. U.S. employers added just 73,000 jobs in July, and more than a quarter million jobs were erased from May and June after the Bureau of Labor Statistics retroactively revised the data.

Bostic said that softening employment data did cause him to change his thinking about rate policy, but for now he remains in wait-and-see mode and anticipates that clearer signs will emerge over the next five to six weeks, before the Fed’s September meeting.

Bostic’s stance contrasts with rising market expectations of a September rate cut. Investors are now pricing in a 91.2% chance that the Fed will cut interest rates by a quarter percentage point at its September meeting, according to the CME FedWatch tool. Most traders are pricing in three quarter-point cuts by the end of the year.

In a research note on Thursday, analysts from BNP Paribas said the Fed could cut interest rates by half a percentage point at each of its next three meetings if labor market weakness continues.

Other Fed officials have signaled a growing openness to easing. Governor Lisa Cook said Wednesday that downward revisions to employment data are “typical of turning points,” while San Francisco Fed President Mary Daly said this week that odds have increased for cuts of more than half a percentage point this year. Minneapolis Fed President Neel Kashkari remained cautious, calling the labor market “gently softening.” He called for two rate cuts this year.

Bostic said Thursday that his job is to balance the Fed’s dual mandate of full employment and stable prices without being influenced by markets or politics. “Financial markets aren’t our mandate,” he said.

Constant shifts in trade policy, he said, are complicating long-term planning for businesses and making it difficult to determine if the inflation caused by President Donald Trump’s “Liberation Day” tariffs will be persistent or transitory.

“This question about whether tariffs are a one-time thing, or whether they’re going to be more persistent in their effects and might even cause structural changes, I think is perhaps the most important question that we have today,” he said.

While consumers—especially lower-income households—are feeling the strain, Bostic said that many businesses are still hesitant to invest or hire, awaiting greater clarity on policy and pricing.

Looking ahead, Bostic said that he hopes the Fed can begin normalizing rates to a “neutral” level by mid- to late 2026, though he said that the current economic environment makes forecasting especially difficult.

“There are so many moving parts,” he said. “It’s hard to have a lot of confidence.”

Write to Nicole Goodkind at nicole.goodkind@barrons.com