MNI: Fed’s Bostic Says Rates Might Need To Go Higher

The Federal Reserve could need to raise interest rates more than is currently priced in if inflation data remain persistently high and job numbers stronger than expected, Atlanta Fed President Raphael Bostic said Thursday.

“There is a case that could be made that we need to go higher,” Bostic told reporters during a press conference held via telephone. "Inflation is remaining stubborn at elevated levels, labor markets remain quite tight. The economy’s strength could be a bit more than people think, which means we might need to do more.” (See MNI INTERVIEW-Fed May Need To Hike Rates Above 6%)

Bostic said the Fed’s aggressive rate tightening of nearly 500 basis points in the last year was just starting to be felt as a drag on the economy, which argues for moving in quarter point increments rather than more aggressive 50 basis point moves.

“Right now I'm still very firmly in the quarter-point move pacing,” he said. “There’s a plausible case that we’re going to see a more robust slowdown. We’re at a stage where it’s appropriate to be cautious so we don’t do more than we need to but enough.”

Bostic said the Fed has arguably been in restrictive territory for eight to ten months, which he argued is usually when the impact of monetary policy tightening usually starts to bite.