US rate setters tell BBC ‘no rush’ to cut interest rates

US rate setters tell BBC ‘no rush’ to cut interest rates

A key member of the Federal Reserve, the US central bank, has told the BBC that inflation is only coming down “very, very slowly” and “let’s not be in a rush” about cutting interest rates.

Raphael Bostic, President of the Atlanta Federal Reserve, told BBC News that US interest rates should be kept at a “limited level” and may only decrease “at the end of 2024”.

Expected delays to US interest rate cuts have reverberated across the world economy in recent weeks, impacting government borrowing costs, including in the UK.

At the beginning of the year, the market expected a series of rate cuts in the US and across Europe.

Chancellor Jeremy Hunt told reporters outside the Spring Meeting of the International Monetary Fund (IMF) that “what happens in the US has an impact on the UK… inflation coming in slightly above expectations in the US has had some impact on market outcomes in the UK”. .

Changes in the market for government debt could contribute to higher housing and business loan costs. Bank of England Governor Andrew Bailey was at pains to say in Washington that the UK’s inflation pattern was different from what was happening in the US.

Mr Bostic, who cast one of the votes to decide US interest rates, said the American economy was creating a lot of jobs and performing well: “I’ve said for a long time that I expect the US economy to be strong, to continue to be strong, but not this strong, it’s much stronger and more resilient than I expected.”

The strength in the US economy kept inflation higher than expected, he said: “Let’s be patient, let’s not rush [on rate cuts], especially because there are so many good things happening on the employment side”.

He also expressed some concern about the US government debt, which will certainly hit a record, with little sign of whether the main Presidential candidates are addressing the issue: “Maybe we need to talk about, are we undermining confidence in the full faith and credit of the US government, because we really can’t do that”.

He also said that although the US dollar’s role as the world’s number one reserve currency is “safe today” he thinks that “everyone has to do things to ensure that safety happens. When we get on a bus or a car or an airplane, we wear a seat belt.” .