Atlanta Fed President Warns Central Bank Credibility Is at Risk as Inflation Persists

Atlanta Fed President Warns Central Bank Credibility Is at Risk as Inflation Persists

2025-12-17 economy

Atlanta, Wednesday, 17 December 2025.
In his final quarterly message issued December 16, 2025, Atlanta Fed President Raphael Bostic cautions that the Federal Reserve’s credibility on inflation is perilously close to being compromised. Despite the FOMC’s recent decision to cut rates by 25 basis points, Bostic identifies price stability as the single most pressing economic risk, noting that the underlying price level has surged nearly 20 percent over the past five years. While acknowledging the rising distress in the labor market—evidenced by unemployment hitting a four-year high of 4.6 percent—Bostic argues that aggressive easing now could disastrously untether inflation expectations. This analysis underscores the severe “quandary” policymakers face heading into 2026: choosing between immediate relief for a softening job market or maintaining restrictive policies to prevent long-term inflationary damage.

The Federal Reserve is currently navigating what President Raphael Bostic describes as the “most challenging policymaking environment” since he joined the central bank in 2017 [1][2]. This complexity stems from the divergence between the Fed’s two statutory goals: maintaining stable prices and fostering maximum sustainable employment [2]. While the Federal Open Market Committee (FOMC) enacted a 25 basis-point reduction in the federal funds rate on December 10, 2025, Bostic argues that further aggressive monetary easing could be premature [1]. He warns that moving policy too deeply into accommodative territory risks “untethering” the inflation expectations of businesses and consumers, a scenario that would undermine the hard-won progress of recent years [1].

Labor Market Tensions and Economic Projections

This hawkish stance comes amidst undeniable signs of softening in the labor market, creating a “quandary” for policymakers [2]. Data indicates that the unemployment rate for November 2025 climbed to 4.6 percent, marking a four-year high [5]. Bostic acknowledges that specific demographics, particularly Black Americans and recent college graduates, are already suffering from these shifts in employment dynamics [1]. However, he remains unconvinced that aggressive monetary policy is the appropriate remedy for these specific labor market weaknesses at this juncture, fearing that prioritizing employment support now could reignite inflation [1].

Leadership Transition at the Atlanta Fed

This quarterly message serves as Bostic’s final comprehensive policy commentary before his scheduled retirement in February 2026 [1]. In preparation for this leadership change, the Federal Reserve Bank of Atlanta announced on December 15, 2025, that it has initiated the search for a new president and chief executive officer [7]. The search committee, chaired by Gregory Haile, is tasked with finding a successor who can navigate the unique economic perspectives of the Sixth Federal Reserve District—which encompasses Alabama, Florida, Georgia, and parts of Louisiana, Mississippi, and Tennessee—during this critical economic juncture [7][8]. Bostic is expected to pen a final farewell message in the first quarter of 2026 [1].

Sources


Federal Reserve Inflation