• Moody's downgrade will cut across economics, financial markets.
  • Downgrade will have implications for cost of capital, could ripple through economy.
  • Will have to wait and see about impact of downgrade on demand for US debt.
  • The Fed will have to determine how the downgrade effects an outlook that is already in flux.
  • It's unclear if consumers today can take on the full cost of tariffs given the state of household balance sheets, recent inflation.
  • We have to wait 3-6 months to see how uncertainty settles.
  • Number of rate cuts this year depends on how things turn out, the details of the tariffs will matter.
  • Leaning more towards only one cut this year because it will take time to understand tariffs.
  • There's a scenario where tariffs become less of a story over time.
  • If the tariff transition is longer, it may impact consumer behavior.
  • Treasury markets are functioning quite well.
  • Inflation not moving to target as fast as anticipated.

Bostic is a hawk and he's not a voting member in 2025. He's been supporting just one rate cut this year.

Fed's Bostic
Fed's Bostic
Source: Forex Live