An additional 25 percentage point hike in interest rates could allow the Federal Reserve to end its monetary tightening cycle with some confidence that inflation will return firmly to the US central bank’s 2% target, the bank chairman said. Fed. Atlanta Fed, Raphael Bostic.
Recent inflation data, including this week’s reports of slowing consumer price increases and declines in producer price inflation, “are consistent with our move again,” Bostic told Reuters on Thursday. in an interview. “We’ve built momentum that suggests we’re on track for 2%.”
For now, the expectation is that the Fed will raise rates by 0.25 percentage points at its May 2-3 meeting, bringing the key interest rate into the range from 5.00% to 5.25%, a level that it had not been seen for just before the onset of the 2007 recession.
In March, when Fed officials recently updated their forecasts, 10 officials agreed with Bostic that another hike would likely be their last, one was ready to give up on this one and take a breather now, and seven others saw an even higher rate. to contain inflation.
As things stand, Bostic said he believes last year’s aggressive interest rate hikes, which pushed the benchmark interest rate from near zero, are only now starting to affect the economy. This is a good reason to stop after yet another rate hike, he said she, to study how the economy and inflation evolve and try to limit the damage to growth and employment.
“There’s still a lot to do. I think the next step is to figure out how much more,” Bostic said, noting that inflation remained two to three times above the Fed’s target, depending on the measure used. .
But “I think the point of ‘hit and hold it’ is ‘hit and hold it’ unless you see an unmistakable trend that’s going in an awkward way,” he said, referring to the Fed aiming for a target interest rates low enough and leave them unchanged for a potentially extended period of time while inflation eases.
The Atlanta Fed chief spoke in detail about how the recent turmoil in the banking markets has affected his views on monetary policy.
At first, high inflation left it open to a half-percentage point hike at the March 21-22 Fed meeting. But ahead of the session, which ended with policymakers raising rates by 25 basis points, he was considering abandoning rate hikes altogether, a sentiment shared by many of his peers, according to the minutes. recently published session.
Between the failure of Silicon Valley Bank on March 10, the collapse of Signature Bank shortly thereafter and the forced merger of Credit Suisse on the eve of the Fed meeting, “I had to slow down a bit and say, ‘I have to have maintenance on the table or pause because we’re in the middle of this chaos,'” Bostic said.
However, like many of his colleagues, Bostic said he was convinced at the meeting, and even more so since, that the recent banking stress won’t cause a major blow to lending or a deeper-than-expected economic slowdown.
Source: Terra
Rose James is a Gossipify movie and series reviewer known for her in-depth analysis and unique perspective on the latest releases. With a background in film studies, she provides engaging and informative reviews, and keeps readers up to date with industry trends and emerging talents.
