Atlanta Federal Reserve Bank President Raphael Bostic said Tuesday that he thinks the Fed doesn’t need to raise interest rates further as it looks to quash inflation, suggesting the central bank’s actions to date may be enough to restore price stability.
Speaking at the annual convention of the American Bankers Association, Bostic acknowledged that there’s "certainly more for us to do" in getting inflation down to the Fed’s target rate of 2% from the 3.7% year-over-year inflation recorded in August. "I actually expect that there will be bumps along the way, but I actually think that we’re in a good place for policy to get us to 2%," he said.
"In my outlook on the dot plot, I don’t have a recession in it," Bostic explained. "I have the economy slowing down, but not moving into a recessionary mode because there’s a lot of momentum that was present and I think that is going to be able to sop up a lot of our slowdown."
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"I think that our policy rate is at a sufficiently restrictive position to get inflation down to 2%. We have clearly moved into a restrictive place, the economy is clearly slowing down, and a lot of our policy impact has yet to come," he said.
Bostic pointed to a lot of refinancing of commercial and corporate bonds that will occur over the next year and a half that are going to "come in at a much higher basis which is going to limit the amount of energy that those are going to be able to produce into the economy."
He noted that the war in the Middle East that broke out over the weekend following Hamas’ terror attack on Israel created uncertainty for both the U.S. and the global economy, which will cause rethinking on markets and investments.
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Bostic went on to say that the last few years have brought several unanticipated events, including the COVID pandemic and Russia’s invasion of Ukraine, which has taught him and other members of the Fed to "just be ready and move into action mode" when needed.
Bostic has been one of the Fed’s more dovish members on interest rate hikes and was one of the earliest to call for an end to them. At the Fed’s meeting last month, most of his colleagues forecasted one more rate hike in the range of a quarter of a percentage point before the end of the year.
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Policymakers at the Fed skipped an interest rate hike at its meeting in September and are scheduled to hold policy meetings two more times this year in November and December, when rates could be increased.
Reuters contributed to this report.
