The Federal Reserve should hold interest rates at elevated levels “for a long time” to bring inflation back down to its 2% target, Atlanta Fed President Raphael Bostic said.
(Bloomberg) — The Federal Reserve should hold interest rates at elevated levels “for a long time” to bring inflation back down to its 2% target, Atlanta Fed President Raphael Bostic said.
“I am not in a hurry to raise, but I am not in a hurry to reduce either,” Bostic said Tuesday at an event in Atlanta, referring to the US central bank’s benchmark interest rate. “I want us to hold. I think that’s the appropriate thing to do, for a long time.”
Speaking with reporters later in the day, Bostic said he expects just one rate cut will be appropriate in 2024, toward the end of the year.
Fed officials are trying to decide whether they need to hike their benchmark again after raising it by more than five percentage points over the last 18 months. At their last policy meeting in September, they left the rate unchanged, though they signaled another increase in 2023 may be appropriate.
Longer-term interest rates have been on the rise since the September meeting as markets adjust to the Fed’s message that the benchmark is likely to remain high for longer than previously thought. The yield on 30-year Treasury securities rose above 4.85% Tuesday, reaching the highest levels since 2007.
Monitoring Yields
“I’ll just have to monitor to see how the broader economy responds to these tighter conditions,” Bostic told reporters.
“If it looks like that’s accelerating in terms of a degree of slowdown, then sure, I should look to modify my expected policy trajectory. To date, right now, that’s not what I’m seeing.”
The Atlanta Fed chief, who does not vote on rate decisions this year, has been among the central bank’s most dovish officials in recent months, arguing that the Fed should stop raising rates and instead focus on how long to maintain them at elevated levels. In an essay posted Tuesday on the bank’s website, he said reports from employers suggest the US labor market is poised to continue slowing.
Separately on Tuesday, Cleveland Fed President Loretta Mester said she would support another increase at the Fed’s Oct. 31-Nov. 1 policy meeting if the economy is performing about the same as at the time of the September gathering.
Investors currently assign slightly better than even odds to the possibility of another rate hike in 2023, according to futures.
–With assistance from Jonnelle Marte.
(Updates with additional Bostic comments to reporters beginning in third paragraph.)
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