Atlanta Fed’s Bostic warns of ‘bumpy’ path to 2% inflation as Georgia economy outperforms U.S.
Writer: Mirella Franzese
March 2025 — While U.S. inflation shows signs of stabilizing, Atlanta Fed President Raphael Bostic recently warned that the path to a 2% target remains bumpy, urging investors about potential economic instability ahead.
In his first quarterly message of 2025, which followed the Fed’s decision to stabilize rates at 4.25-4.50%, Bostic provided a cautiously optimistic assessment of Atlanta’s labor market and economy, while also acknowledging the threat of new fiscal, trade, and immigration policies.
“This is no time for complacency,” said Bostic. “I view the employment outlook as stable, but signs of slowing are accumulating. And despite considerable progress, our campaign to bring inflation to the Committee’s 2 percent goal is not complete, and additional threats to price stability may emerge.”
The likelihood of a regional recession beginning in 2025 is nearly 10% higher than expected in an average year, according to forecasts made by UGA’s Terry College of Business Director Jeffrey Humphreys, in a January 2025 report. (Although the odds are lower than last year, which were nearly 20% higher.)
Humphreys, who heads the university’s Selig Center for Economic Growth, identified five main triggers with high recession risk potential: policy mistakes by the Federal Reserve and federal government, a financial and/or banking crisis, an energy price shock, escalation of conflict in the Ukraine or Middle East, and a stock market correction.
Since the January report, a number of Humphrey’s projections have materialized to varying degrees. The impact of the new administration’s trade and immigration policies, while yet to be fully realized, have caused stock market price volatility, raising concerns from investors over potential policy missteps and lack of clarity.
Energy prices have also oscillated since the beginning of the year with tariff-related fears hurting domestic oil prices, which have hit the lowest level of the year, according to MarketWatch. Likewise, U.S. bond yields have declined and economic strain is evident.
Despite the cautious outlook for the American economy, the state of Georgia is expected to outperform the nation. Georgia’s inflation-adjusted GDP is projected to increase at a slower rate of 2.4%, compared to the 3.1% of previous year’s. U.S. GDP, by contrast, is expected to slow down even further, dropping to 1.6% from 2.5% in 2024. “The slowdown that we’re expecting will be smaller here in the state of Georgia,” said UGA’s Terry College of Business Dean Ben Ayers in a presentation of Georgia’s 2025 Economic Outlook last December.
Nonetheless, market uncertainties remain a major area of concern for Peach State business. According to a report by the Atlanta Fed’s Camelia Minoiu, U.S. tariffs could potentially expose the banking sector to higher lending risks as a result of uncertainty, especially in sectors of the economy that are dependent upon import-export relations, such as automotive, energy, oil, and agriculture — which accounts for a sizeable share of Georgia’s GDP. Loans would conceivably be harder to obtain under this scenario, which could introduce challenges for local businesses that rely on private financing.
President Trump’s new immigration policies, on the other hand, could impact labor supply in the construction, leisure, and hospitality industries. An abrupt decline in the number of available skilled workers in these sectors could affect employers and their daily operations.
Under these shifting economic conditions, sustaining employment growth and managing inflation levels will prove challenging, says Bostic. Both Humphreys and Bostic don’t expect inflation to drop further down this year after decreasing from 8% in mid-2022 to around 3% in 1Q25.
Economists also indicate that disproportional employment growth in Georgia’s main sectors could ‘wane’ in the near-term. Three sectors in particular, namely healthcare and social assistance, leisure and hospitality, and government, drove 75% of all job growth over the past year — a 30% increase from the years preceding the pandemic — but that rate is not likely to hold up in the near-term.
“Labor demand softening took the form of dwindling job vacancies,” explained Bostic. Georgia’s unemployed workers are taking on average three weeks longer to find a job now than compared to the previous summer due to the dip in job openings.
“Not surprisingly, then, fewer people feel comfortable enough about finding new work to quit their job. The “quits rate,” the percentage of all workers who voluntarily leave a job in a given month, has declined to levels last seen in 2015, excluding the pandemic years,” wrote Bostic.
Regardless of economic uncertainties, he maintains that price stability is no longer the urgent concern and that the regional labor market remains strong, despite having ‘cooled’ slightly.
“As for price stability, I’m confident inflation will settle to 2 percent in time, even if the ride continues to be bumpy,” Bostic noted.
“The economy is strong, monetary policy is well positioned, and today’s pervasive ambiguity calls for caution and humility as we continue working to bring about price stability and maximum employment for the American people.”
Top image via Thomson200/Wikimedia
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