Federal Reserve Bank of Atlanta President Raphael Bostic said he favors raising interest rates one more time and then holding them above 5% for some time to curb inflation that remains too high.
(Bloomberg) — Federal Reserve Bank of Atlanta President Raphael Bostic said he favors raising interest rates one more time and then holding them above 5% for some time to curb inflation that remains too high.
“There is still more work to be done, and I am ready to do it,” Bostic said Tuesday during an interview on CNBC. After the next move, he said, “if the data come in as I expect, we will be able to hold there for quite some time.”
Fed officials are expected to raise rates by 25 basis points from a current target range of 4.75% to 5% when they meet May 2-3. They could also signal a pause as they watch for evidence that price pressures are fading.
But St. Louis Fed chief James Bullard, who’s been among the more hawkish policymakers, separately told Reuters that he favors getting rates into a 5.5% to 5.75% range.
No Recession
“Wall Street’s very engaged in the idea there’s going to be a recession in six months or something, but that isn’t really the way you would read an expansion like this,” Bullard was quoted as saying. He cited strength in the labor market as bolstering consumption this year.
Neither Bostic nor Bullard votes on monetary policy this year.
Bostic also played down the risks that the US economy would topple into a recession and that recent strains in the banking sector would generate harmful headwinds to growth.
“The acute tensions seem to be subsiding,” he said, adding he has received encouraging reports from regional and community banks in the Southeast. “What they’re telling me is that they’re not having their customers call them wondering whether they should move their money. They’re not seeing removals of deposits out of them and into larger banks.”
His preference on rates is in line with the median of Fed policymakers, who have penciled in one additional quarter-point hike this year. Investors are almost fully pricing in a final rate increase when officials meet early next month.
“The economy still has a lot of momentum and it’s performing quite strongly and inflation remains too high,” Bostic said. “Part of the challenge we have right now is that we have an economy that aggregate demand is extremely strong and we’re going to have to see some weakening, but we just have not seen weakening happen at very large increments.”
Bostic said he was encouraged by long-term inflation expectations, which show Americans largely have confidence in the Fed’s message that it will reduce inflation.
While inflation reports last week showed some signs of easing price pressures, most Fed officials who have spoken since have highlighted the need to do more to return price gains to their 2% target.
(Updates with additional quotes starting in second paragraph.)
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