Raphael Bostic mentioned during a live interview on CNBC’s “Squawk on the Street” that “One more move should be enough for us to then take a step back and see how our policy is flowing through the economy, to understand the extent to which inflation is returning back to our target.”
It is estimated that a 0.2 percentage point increase is likely to come at the rate-setting Federal Open Market Committee’s (FOMC) meetings held on May 2-3.
However, if a majority of the committee acquired the similar estimates as Bostic, who is an abstaining member this year, that would take the federal funds rate to a target range of 5%–5.25%, which is known to be the highest since August 2007.
From there, Bostic said he also thinks the FOMC can watch as the falls that come with fiscal policy work their way through inflation, employment, and the wider U.S. economic picture.
“If the data comes in as I expect, we will be able to hold it for quite some time,” Bostic said.
“And once we get to that point, I don’t have us really doing anything but monitoring the economy for the rest of this year and into 2024,” he added.
Although markets disagree that the Fed will be in a hold position.
According to CME Group (a financial service provider) estimates, the current pricing value indicates an 87% chance of a quarter-point hike in the upcoming month, which might result in a pause for a few months, then a half-percentage point cut by the end of 2023 as the economy downshifts.
“Inflation is still running too high to consider cuts,” Bostic said.
“Part of this is really about … inflation’s returning back to our 2% target. I don’t think that’s going to happen as quickly as some of the markets do. And it seems that the question is who’s right on this?” he said.
“I don’t see it coming down below maybe 3½. And 3½ is still well above our 2% target,” he added.
He also noted that he could not evaluate the economy’s tilting into recession, even though Fed economists warned at the March FOMC meeting that a minimal contraction is likely to occur later in the year.
Bostic added that the rigid monetary policy is likely to continue despite the recent issues in the banking industry that are estimated to trigger the recession.
He described the situation of banking in his district as “stable,” though he also mentioned that “you never know when the next shoe might drop,” adding that the Fed would always remain on the lookout “to make sure that we’re ready.”
- Published By Team Genuine Reporter