US progress on inflation likely to be slow: Atlanta Federal Reserve

US Progress: The Atlanta Federal Reserve President, Raphael Bostic, said inflation could "see-saw" if policymakers cut interest rates too soon, warning that inflation's descent towards the central bank's 2 per cent goal was likely to slow in the months ahead, the Financial Times reported on Sunday.

Bostic, who will be a voting member on the Federal Open Market Committee in 2024, said he was "expecting to see much slower progression of inflation moving forward," while adding that there were "some risks that inflation may stall out altogether," according to the report.

The Atlanta Federal Reserve President acknowledged that price pressures had fallen faster than he had expected in 2023, however, he still thinks inflation is likely to be nearly 2.5 per cent by the year-end and only hit the Federal Reserve goal in 2025, the FT said.

After the Federal Reserve's December policy vote, Bostic said he thought rates would need to remain on hold until after the summer. He told the Financial Times that the uncertainty facing the US economy warranted such a cautious approach.

"Inflation must be firmly and surely getting back to our 2 per cent target," the newspaper quoted Bostic as saying. "It would be a bad outcome if we started to ease, and inflation started to rise up and down like a see-saw. That would undermine people's confidence in where the economy is going."

Bostic said the recent increase in shipping costs due to the disruption of traffic in the Suez Canal caused by Houthis targeting vessels would need to be watched "very closely".

"It will be very interesting to see to what extent the Middle East conflict and attacks on the container ships is starting to show up in the cost structure for businesses in my district," Bostic told.

In December, Bostic said the Federal Reserve can begin reducing rates "sometime in the third quarter" of 2024 if inflation falls as expected.

(With Reuters Inputs)