Federal Reserve Bank of Atlanta President Raphael Bostic said inflation has come down more than he expected and is on a path today to reaching the Fed’s 2% goal, though it’s too early to declare victory.
“We are on a path to 2% today,” Bostic said Monday in a moderated discussion hosted by the Rotary Club of Atlanta. “The goal is to make sure we stay on the path.”
The Atlanta Fed chief cited three- and six-month inflation measures showing price pressures continue to move toward the central bank’s target. At the same time, the unemployment rate has remained lower than many economists had forecast and wage growth is exceeding inflation, giving consumers more purchasing power, a trend that Bostic said he expects to continue.
“We are in a very strong position right now,” he said, adding that policymakers can continue to let monetary policy remain restrictive.
“We are in a restrictive stance and I’m comfortable with that, and I just want to see the economy continue to evolve with us in that stance and hopefully see inflation continue to get to our 2% level,” he said.
The Federal Open Market Committee voted unanimously to hold its benchmark lending rate steady in a range of 5.25% to 5.5% for a third consecutive time in December. While central bankers left the door open for another hike, their forecasts released after the meeting signaled the end of the most aggressive tightening cycle in a generation.
Officials’ quarterly economic projections show they expect three rate cuts in 2024, according to their median forecast. Still, policymakers have pushed back against market expectations that they would begin cutting interest rates as soon as their March meeting. Fed officials next meet on Jan. 30-31.
Bostic on Monday repeated his expectation for two rate cuts this year, and told reporters after the event that he expects the first cut in the third quarter.
The December jobs report on Friday showed continued strength in employment with higher wages, which some Fed officials have seen as risking higher prices. Nonfarm payrolls increased 216,000 after downward revisions to the prior two months, a Bureau of Labor Statistics report showed. The unemployment rate held at 3.7%, while average hourly earnings rose 0.4% from a month earlier.
While Bostic was among the first policymakers to call for an end to Fed rate hikes last year, he has repeatedly called for keeping policy tighter for longer. He said in December that he expects the US central bank will cut rates just twice in 2024, in the second half of the year.
Bostic also told reporters it’s an “open question” if and when the Fed should alter the pace at which it reduces its portfolio of assets, adding that the current pace is appropriate. Dallas Fed President Lorie Logan said Saturday the Fed may need to slow down the pace of its balance-sheet runoff amid scarcer liquidity in financial markets.
Source: bloomberg.ca
