What Bostic’s Plan Says About the Future of Rates and Inflation

Rafael Bostic, one of the Fed’s influential governors, has pitched a clear but careful plan. He argues for a lone interest rate cut in 2025. The following year, 2026, could see a more active easing – around three cuts..

I continue to expect one interest rate cut this year and three interest rate cuts are expected next year,

Bostic said.

His argument hinges on the labor market’s resilience. People keep finding work, and jobless claims stay minimal. That strength, Bostic says, proves the economy doesn’t need a flood of “cheap money” now. It also gives the Fed the luxury to weigh each decision calmly.

Bostic explains that policymakers need time to see if inflation truly eases and the economy holds steady. He argues the best move now is to “wait and watch” before tweaking policy again. After all, the global backdrop remains shaky, especially with potential new White House trade tariffs on the horizon.

In doing so, Bostic strikes a more cautious note than some Fed peers who already discuss summer cuts. He doesn’t rule out rate reductions; he simply cautions against premature action driven by market whims. He wants clarity first. That prudence may feel conservative, but it lowers the odds of a costly policy error.

Politics as a Risk: Trump’s Tariffs Return

For Bostic, the chief threat comes not from markets but from policy – namely, new tariffs under Donald Trump. He notes that recent duties on Chinese goods are already squeezing companies. That squeeze, Bostic warns, is cumulative. We don’t have a full picture yet, but businesses are bracing to shift higher costs onto shoppers. That dynamic will drive prices up.

Rather than a sudden leap, prices will inch higher in successive waves. Bostic’s core concern is this slow burn of inflation. As costs rise bit by bit, fear of ongoing inflation can take hold. Firms may preemptively raise their prices. Consumers, worried about mounting costs, may trim spending. Economists label this change in inflation expectations. When expectations shift, behavior follows, fueling price growth even when official inflation seems to be easing.

Also read: What Are Trump’s Tariffs: A New Blow to the Economy?

Bostic makes no mystery of it: tariffs will eventually drive prices up, and he anticipates another wave of inflation. He’s not in a hurry to endorse rate cuts until he knows how tariff measures play out. Interestingly, a few of his Fed counterparts rate these threats as less severe and are already urging policy easing.

Bostic’s Rationale: Why Further Hikes Aren’t Needed

According to Rafael Bostic, the Federal Reserve’s past hikes have done their job in taming inflation. He points out that prices still tick upward, but far more gradually. And businesses aren’t quick to shift increased costs onto buyers.

He sees this as a clear sign of fading pressure. That’s why he argues against further rate rises until the trend proves itself.

Bostic believes that as long as we don’t disrupt what’s working and let the economy process existing measures, inflation will settle back to the 2% mark on its own. Further rate hikes now carry the danger of going too far and shove us into recession. That’s why he endorses a hold-and-watch approach: step in only if things start to veer off course.

He’s not the only one, though he’s in the minority. Other Fed officials insist only fresh tightening can conquer inflation. In effect, the Fed faces a split: strike hard or tread lightly. Bostic firmly chooses the latter. He trusts that earlier moves will continue to bear fruit, and he notes that restoring global supply chains simply takes time—a luxury he thinks the Fed still enjoys.

How This Shapes Markets, Crypto, and Expectations

Investors track every Fed official’s tone, and Bostic’s remarks made waves. He stopped short of pledging a sudden shift, but simply discussing cuts is notable. It suggests the hiking cycle is winding down and a gentler stance is ahead – just not immediately.

For the crypto sphere, that means tempered hopes. We won’t see instant “cheap money,” yet the direction is clear. Crypto historically reacts to potential rate cuts with rallies. Bostic’s approach – one cut now, three later – signals easing ahead, paced rather than rushed. 

Market prices are already reflecting these expectations: Bitcoin jumped 2.6% in the last 24 hours, reaching $107,755.

All in all, the environment for crypto is cautiously positive. The Fed hasn’t opened the syringe of liquidity, but it’s turning the dial toward easier policy. That backdrop could fuel steady, if unspectacular, gains. Bostic’s tone points to a measured bullish path. A sudden “to the moon” rally seems off the table, yet the Fed’s easing bias offers a base for crypto growth in H2.