Fed's Bostic: Inflation is not at the Fed's target, central bank needs to preserve its credibility by meeting that goal

Fed's Bostic: Inflation is not at the Fed's target, central bank needs to preserve its credibility by meeting that goal

Federal Reserve Bank of St. Louis President James Bullard has reiterated that inflation is currently not aligned with the Federal Reserve's target, emphasizing the need for the central bank to preserve its credibility by meeting this goal. Bullard's comments come amidst ongoing political pressure on the Federal Reserve, particularly from President Donald Trump, who has criticized the Fed's handling of monetary policy.

In June 2025, the Consumer Price Index (CPI) rose by 0.3% compared to the previous month and 2.7% year-over-year, according to data from the Bureau of Labor Statistics [1]. This increase, while in line with economists' forecasts, marks an acceleration from the previous month's figures. Core prices, which exclude more volatile measurements of gasoline and food, also rose by 0.2% month-over-month and 2.9% year-over-year. Both measures indicate a steady upward trend in inflation.

The Federal Reserve has faced criticism for its discretionary monetary policy, with some arguing that it should adopt a more rules-based approach. A commentary from the Cato Institute highlights that the Fed's failure to keep inflation low and stable post-COVID-19 pandemic is evident, and suggests that adopting a rules-based monetary policy could improve macroeconomic outcomes and shield the Fed from political attacks [2].

Bostic's remarks underscore the importance of the Fed's independence and its ability to make decisions based on economic data rather than political pressure. The Fed's credibility is crucial for maintaining market confidence and stability, and any deviation from its target could lead to further economic uncertainty.

As the Fed prepares for its upcoming meeting later this month, it will be essential for policymakers to consider the implications of Bostic's comments and the broader political landscape. The Fed's ability to manage inflation and maintain its independence will be key to ensuring economic stability in the coming months.

References:
[1] https://www.foxbusiness.com/economy/cpi-inflation-june-2025
[2] https://www.cato.org/commentary/what-powell-needs-do-now-fend-trump-keep-fed-independent