WASHINGTON (Reuters) – Atlanta Federal Reserve President Raphael Bostic said Saturday he’s able to “move away” from three-quarter-point rate hikes on the Fed’s December meeting and feels the Fed’s goal policy rate need rise not more than one other percentage point to tackle inflation.
“If the economy proceeds as I expect, I feel that 75 to 100 basis points of additional tightening will likely be warranted,” Bostic said in remarks prepared for delivery on the Southern Economic Association. “I feel this level of the policy rate will likely be sufficient to rein in inflation over an inexpensive time horizon.”
That might set the Fed policy rate at a spread between 4.75 and 5%, barely below the height rate expected by investors. It’s currently set in a spread between 3.75% and 4%.
The Fed at its December meeting is anticipated to lift rates by half a percentage point after using three-quarter point increments at its last 4 meetings, a view endorsed by Bostic in addition to a spread of other Fed officials recently.
Bostic said that given the inflation surprises of the past yr, it is feasible the “landing rate” is perhaps higher than he currently anticipates, and that he was going to be “flexible in my fascinated with each the suitable policy stance and the pacing.”
But in some unspecified time in the future, he said, the Fed would want to pause and “let the economic dynamics play out,” on condition that it could take what he estimate as anywhere from 12 to 24 months for the impact of Fed rate increases to be “fully realized.”
“Being more cautious as policy moves deeper into restrictive territory seems prudent,” Bostic said, even when it seems to be the case that rates should be raised again later.
One thing the Fed should guard against, Bostic said, is any temptation to chop rates before inflation is “well on target” to fall to the Fed’s 2% goal, even when the economy were to “weaken appreciably.”
“We wish the general public and markets to obviously understand our goals, and the undeniable fact that we’re going to be unwavering within the pursuit to bring underlying inflation back toward our 2% objective,” Bostic said.
Recent inflation data have are available lower than expected. But key price increase measures have still been running at 2 to three times the Fed’s goal level.
(Reporting by Howard Schneider; Editing by Daniel Wallis)
Copyright 2022 Thomson Reuters.