The Federal Open Market Committee (FOMC) voted unanimously Wednesday to hold interest rates steady amid uncertainty over trade policy, as well as economic concerns that have been observed but have yet to appear in data.
Atlanta Fed president Raphael Bostic supported the decision, citing the potential continuation of the current period of uncertainty.
"Uncertainty is still pervasive in the economy, and business contacts tell my staff and me that they expect uncertainty to persist longer than they had anticipated earlier this year," Bostic said. "I don't think it's prudent to adjust monetary policy with so little visibility of the path ahead."
The Atlanta Fed's regional business contacts reported mostly neutral to negative sentiments about the economy in the Southeast in comments gathered from March to mid-April for the April 23 edition of the Beige Book, the Fed's national and district-specific overview of descriptive, anecdotal information. Policymakers will want to see how these reports show up in hard, or quantitative, data in upcoming reports as they seek a clearer view of the economic outlook.
"In surveys and in our conversations with business leaders, sentiment has turned increasingly negative, but thus far that hasn't translated into real activity to the extent that it is showing up in the data," Bostic said. "We will see if this disconnect continues."
The rate-setting FOMC voted to leave its benchmark policy rate unchanged at 4-1/4 to 4-1/2 percent. The Fed's short-term borrowing rate influences interest rates on products including credit cards and vehicle loans. The Committee maintained the reduction in the monthly redemption cap on Treasury securities at $5 billion, the rate approved at the March meeting when the FOMC instructed the rate of sales be reduced, starting April 1, from $25 billion to $5 billion per month.
Because of the rotation schedule among voting members of the FOMC, Bostic does not currently cast a vote on policy moves. However, he participates in FOMC deliberations and provides information about the southeastern economy and contributes to the Committee's assessment of the economy and policy options. The Atlanta Fed president is slated to have a vote in 2027, and he said incoming information—both quantitative and anecdotal—will inform his opinion on monetary policy. "I am waiting for clarity as to where policy, particularly trade policy, will ultimately land and, in turn, where prices and labor markets may ultimately be headed," Bostic said.
The FOMC signaled two rate cuts this year in its latest Summary of Economic Projections (SEP), issued March 19. SEPs are issued quarterly, and the next one is due for release June 18. The SEP is widely watched because it contains the projections of FOMC participants of the most likely outcomes for growth in the real gross domestic product, unemployment, and inflation in both short-term and long-run scenarios.
Bostic indicated the economy is moving differently from the expectations he held in early 2025.
"My baseline outlook is we're still going to see resilience from the economy, but it'll be less resilient than I expected at the beginning of the year," Bostic said. "The confidence interval around this baseline is quite wide. Many outcomes are plausible at this point."
Read Bostic's message delivered February 20, "Uncertainty Calls for Caution, Humility in Policymaking," and listen to his January 7 podcast episode,"'There's Still a Lot of Uncertainty': Atlanta Fed President Bostic Looks Back on 2024."
Read the Federal Reserve's FOMC statement, issued May 7.
David Pendered
Staff writer for Economy Matters