Fed’s Bostic says he is ready to ‘move away’ from large rate increases

WASHINGTON, Nov 19 (Reuters) – Atlanta Federal Reserve President Raphael Bostic said on Saturday he was ready to “move away” from the three-quarter rate hike at the December Fed meeting and felt the Fed’s policy target did not require more than one hike. anti-inflation percentage.

“If the economy progresses as I expect, I believe that 75 to 100 basis points of additional tightening will be warranted,” Bostic said in a statement prepared for delivery to the Southern Economic Association. “I believe this level of policy will be sufficient to bring inflation back in time.”

That would put the Fed’s policy rate in a range between 4.75 and 5%, below the high rate expected by investors. It is now placed in the range between 3.75% and 4%.

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The Fed at its December meeting is expected to raise rates by half a percent after using three quarters of rate hikes in its last four meetings, an idea endorsed by Bostic and a list of other Fed officials soon.

Bostic said that due to last year’s inflation shock, it is possible that the “arrival level” may be higher than he currently expects, and “he will be flexible in my thinking about the appropriate policy stance and pace.”

But at some point, he said, the Fed will need to pause and “let the economy play out,” because it could take what he estimated anywhere from 12 to 24 months for the impact of the Fed’s hikes to be “fully. realized.”

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“Being more cautious as policy moves deeper into restrictive territory seems prudent,” Bostic said, even if rates are likely to be raised again later.

Another thing the Fed should be wary of, Bostic said, is any temptation to cut rates before inflation “goes well” below the Fed’s 2% target, even if the economy is “going to be appreciably weaker.”

“We want the public and the markets to clearly understand our goals, and the fact that we will remain steadfast in our mission to return inflation to our 2% target,” Bostic said.

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The latest inflation data came in lower than expected. But significant rate hikes still operate at 2 to 3 times the Fed’s target rate.

Report by Howard Schneider; Editing by Daniel Wallis

Our standards: The Thomson Reuters Trust Principles.

Howard Schneider

Thomson Reuters

It covers the US Federal Reserve, monetary policy and the economy, a graduate of the University of Maryland and Johns Hopkins University with previous experience as a foreign correspondent, economic reporter and local staff of the Washington Post.

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