Fed's Bostic says U.S. interest rates are high enough
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[August 31, 2023] (Reuters)
- Atlanta Federal Reserve Bank President Raphael Bostic laid out a case
on Thursday against any further U.S. interest rate hikes, saying
monetary policy is already tight enough to bring inflation back down to
2% over a "reasonable" period.
"I feel policy is appropriately restrictive," Bostic said in remarks
prepared for delivery to the South African Reserve Bank Biennial
Conference in Cape Town, South Africa. "We should be cautious and
patient and let the restrictive policy continue to influence the
economy, lest we risk tightening too much and inflicting unnecessary
economic pain."
However, "that does not mean I am for easing policy any time soon," he
noted.
U.S. central bankers are widely expected to leave the Fed's policy rate
in the current range of 5.25%-5.5% when they next meet in a little less
than three weeks.
But financial markets are pricing in close to even odds that the Fed
will ultimately lift that rate another quarter of a percentage point by
year's end, given still too-high inflation, stronger-than expected
economic growth and still-low unemployment, most recently measured at
3.5%.
As of mid-June, a large majority of U.S. central bankers also thought a
Fed policy rate in the 5.5%-5.75% range would be needed to win the fight
against inflation.
Bostic has been in the minority at the Fed, cautioning against
over-tightening policy and needlessly hurting jobs and livelihoods.
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Some 5.25 percentage points of interest-rate hikes since March 2022 have
already helped put inflation on a clear downward path, Bostic said on
Thursday, noting that consumer price inflation has dropped from a 9%
peak last summer to 3.2% in July.
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![](../images/083123PIX/busine87.jpg)
U.S. Atlanta Federal Reserve Bank
President Raphael Bostic speaks to reporters at the National
Association of Business Economics' annual policy meeting in
Washington, U.S. March 21, 2022. REUTERS/Ann Saphir
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And given that falling rents have yet to be reflected in housing
services inflation data, he said, the underlying pace of inflation
"may well be close to our target already."
Business surveys show fewer firms plan to continue raising prices,
he noted, and the percentage of items within the consumer price
index that are registering 5% or higher inflation has fallen to 35%,
down from 80% last summer.
Meanwhile, the labor market is cooling, Bostic said, and employers
say they do not plan to raise prices to keep pace with the higher
wages they are paying.
Overall, he said, the Fed must stay "resolute" on keeping policy
tight until it is clear that inflation is on track to reaching the
Fed's 2% goal over a reasonable time frame, he said.
"I believe policy is already restrictive enough to get us there."
Fed policymakers will release fresh projections at the close of
their Sept. 19-20 meeting that will show how many of Bostic's
colleagues may now agree with that view.
(Reporting by Ann Saphir; Editing by Richard Chang)
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