December 6, 2022

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Fed Bostic expresses caution about pace of rate hike

Fed Bostic expresses caution about pace of rate hike

Atlanta Federal Reserve Chairman Rafael Bostic on Tuesday expressed concern about the impact of raising interest rates on the US economic recovery, saying the central bank should not move so quickly that it stifles growth.

In an interview with CNBC, Bostick did not commit to how quickly the Fed should increase interest rates. Instead, he said, policymakers should measure their approach and monitor how what they do affects conditions.

“I think I’m in the same fields as my colleagues philosophically,” he told CNBC reporter Sarah Eisen atclosing bell“Interview.” I think it’s really important that we take a neutral stance and do it in a quick way.

“Neutral” is the rate at which an economy operates on its own at rates that neither promote nor constrain growth. Bostick said that rate could be as high as 1.75%. This puts it close to a broker The Fed’s “point chart” A forecast of individual members is issued every quarter.

“It really got us looking at a quarter and three quarters by the end of the year, but it could be slower depending on how the economy develops and we’re seeing more weakness than I see in my base model,” he said. “That’s one of the reasons why I’m reluctant to really publicize that we want to go a long way outside of our neutral spot, because that could be a bigger hike than is warranted given some kind of economic environment.”

who – which puts it in return With some other FOMC members.

On Monday, St. Louis President James Bullard said he sees the federal funds rate, which serves as the benchmark for many consumer debt instruments, rising to 3.5%. He said the Fed needs to move beyond neutrality if it has hopes of taming inflation, which is running at its fastest pace in more than 40 years.

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But Bostick said the Fed “needs to be vigilant as we move forward”. He said inflation could be at its peak, although he noted that real income adjusted for cost of living was declining.

“We need to get away from zero, I think zero is less than we should be now,” he said. “But at the same time, we just have to pay attention.”

Market pricing is for a rate hike that would raise the money rate to 2.5% and eventually raise the Fed to about 3.2% before cutting rates in late 2024.

Federal Reserve Board Atlanta Tracks GDP growth in the first quarter of just 1.3%, although Bostick said he expects the annual pace in 2022 to be around 3%.

“My goal is not to have a slump while I’m sitting in this chair, and I’m going to do everything I can to make that right,” he said.