MNI: Fed Can Expect Inflation Progress Without Hikes - Bostic

Federal Reserve Bank of Atlanta President Raphael Bostic argued Thursday the FOMC should expect progress on inflation to continue even absent additional interest-rate hikes.

"It is wise to take a period to assess how monetary policy tightening is affecting the economy because, in my view, policy has been truly restrictive only for eight or nine months," he said in a speech delivered at the Irish Association of Investment Managers in Dublin.

Bostic repeated his previous message that his baseline outlook sees the fed funds rate sitting at its current range of 5% to 5.25% but does not absolutely rule out the necessity of further hikes in coming months. (See: MNI INTERVIEW: Fed’s Bostic Wants Rates On Hold Until End 2024)

"While my base case does not anticipate further rate hikes, it also does not have the federal funds rate coming down in 2023 or 2024," he added Thursday. Chair Jerome Powell has warned the Fed could raise rates further to bring inflation back to target.

RISK OF OVERTIGHTENING

The Atlanta Fed's business contacts offer evidence of easing in labor market conditions and many have reported it’s harder to pass on higher input costs, he said.

The data, survey results, and on-the-ground intelligence constitute a reasonable case that gradual disinflation will continue, Bostic said.

"It makes sense to give restrictive monetary policy time to work. In my view, it is less certain that we need to keep hiking the policy interest rate in the immediate term, lest we risk tightening too much and draining too much momentum from the economy."