MNI: Bostic Says Fed Restrictive Enough To Get Inflation To 2%

Federal Reserve Bank of Atlanta President Raphael Bostic Thursday reiterated his view that monetary policy is already restrictive enough to get inflation on track toward 2%, adding he doesn't see the need for easing policy any time soon.

"Based on current dynamics in the macroeconomy, I feel policy is appropriately restrictive. I think 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," he said in prepared remarks.

"That does not mean I am for easing policy any time soon. Inflation in the United States is still too high," he added. The Atlanta Fed president said he would support additional tightening if inflation or inflation expectations abruptly reverse course and start climbing. (See: MNI INTERVIEW: Hawkish Fed Pause In Sept - Ex-Staffer Trezzi)

Still, he argued the lagged nature of rental prices in the calculation of CPI and PCE inflation means underlying inflation may well be close to the Fed's target already.

Were it not for housing services prices, core CPI would be running at 2.6% on a year-over-year basis, and just 1.1% over the past three months, "a rate that is well below price stability," the Atlanta Fed president said, also pointing to the bank's Sticky-Price CPI as a source of confidence that inflation is headed in the right direction.

Surveys and conversations also make clear that employers plan to taper down wage hikes to normal prepandemic levels in the coming years, he said in a speech at a South African Reserve Bank conference. "I’m not overly concerned that a period of moderate real wage growth will rekindle inflationary pressures."

Bostic also said there appears to be measured cooling in the labor market, pointing to an average of more than 40,000 jobs a month lower revised payroll employment growth and the BLS’s preliminary benchmark revisions. "Furthermore, the job market may be cooling even faster than the headline numbers suggest, as growth in total hours worked has slowed more than growth in employment because of recent increases in part-time work," he said.