Atlanta Fed President Bostic approves rate increase to 4.5%

Raphael Bostic, president of the Federal Reserve Bank of Atlanta, voiced support of the further interest rate hiking to a range of 4%-4.5% towards the end of the current year to reduce inflation.

As it was stated by Bostic, the preferable course of action would be the reaching of moderately restrictive policy within a range of 4%-4.5% before the next year begins, and holding it at the said levels for some time. The further moves would depend on the reaction provided by prices and the economy.

This point of view corresponded to the Federal Open Market Committee’s projections it had released last month. The group of officials responsible for policymaking has already delivered three subsequent rate hikes by three quarters of a percentage point, all the while indicating an upcoming increase by additional 125 basis points, which would take place at two meetings scheduled for the rest of the year. According to estimations, there is a rate hike by 75 basis points expected at the upcoming Fed’s meeting of November 2.

There is also some lowering of interest rates expected for the end of the next year, according to the market expectations. Still, this opinion isn’t shared by Bostic, who questions such a rapid change. According to his words, he doesn’t approve changes of this kind happening too soon. He stands for a slower pace of lowering despite the existing suggestions of possible rate decreasing by the Fed in 2023, which might become true in case of economic activity slowdown and reducing of inflation.

His opinion is in consonance with a point of view of Mary Daly, President of the Fed in San Francisco. In her recent interview with Bloomberg TV, she stated her intention to remain resolute in inflation battling. Moreover, she added that she doesn’t actually see the mentioned lowering coming any time soon.

The current situation, in Bostic opinion, is complicated, although there are certain signals on inflation that might induce some hope. He shares Daly’s opinion of the necessity to keep the Fed’s policy resolute, even under the condition of the weakening of both the labor market and the economy in general.

Bostic stated that his baseline projection suggests the U.S. economy to be strong enough to let the Fed tighten its policy to the mentioned range of 4%-4.5%, thus not bringing havoc to output and labor market.