MNI: Fed's Bostic Sees Rate Hike in 2022, Two Hikes in 2023

Atlanta Federal Reserve President Raphael Bostic said Wednesday he sees the standard for beginning a slowing of the Fed's asset purchases coming sooner, potentially in the next 3 to 4 months depending on jobs data, and has penciled in a single rate hike in late 2022 and two rate hikes in 2023.

"Given the upside surprises and recent data points, I pulled forward my projection for our first move to late 2022," Bostic said in remarks to reporters after speaking at the Russell Innovation Center for Entrepreneurs. "The economy is well on its way to recovering from the pandemic, and much of the data, recently has come in stronger than expected."

"We've had a couple of months of some good numbers," he noted. "And if we got several more months of that, you know, three to four. That would be the signal to me that we would be really in a very solid economy," Bostic said referring to reaching the Fed's benchmark for "substantial further progress."

TAPERING

How the Fed goes about tapering its asset purchases will likely be different to how the central bank moved after the financial crisis, he said, noting that he does not have strong views about tapering MBS versus Treasuries, but how it is done "is really going to depend on what the labor numbers are."

"The MBS purchases have been relevant for housing, but I think that you know there's a lot of capital out there in housing markets, such that I'm not exactly, I'm not fully clear on how that market would evolve in terms of transactions or the like as we pull back" Bostic said, citing the housing market as a factor in meeting "substantial further progress."

Bostic said his "preference" would be not to have rates lifting off before a taper of QE ends. "We spend a lot of time working to have clarity in terms of what our policy levers are moving. Multiple levers at once add some complication to how we talk about things and how people are interpreting what we're thinking. So I'd rather have one thing at a time," he said.

Earlier Wednesday, some former Fed officials told MNI the central bank could look to start raising rates before tapering had run its course.

The Atlanta Fed chief said his outlook, now seeing the economy growing 7% this year with inflation coming in at 3.4% and employment ending the year at 4.5%. Growth will fall to 3.1% and inflation will back down to 2.1% in 2022, he said.