ATLANTA, Georgia (Reuters) – Atlanta Federal Reserve President Raphael Bostic said on Monday that with inflation still above the central bank’s 2% target, his bias is for monetary policy to remain tight even though overall risks in the economy have become balanced between those posed by rising prices and those posed by slower employment growth.
“I’ve got a natural bias to be tighter,” Bostic said in comments at a lunch event with the Rotary Club of Atlanta. “I want to make sure we are really, really there” in terms of returning inflation to the Fed’s 2% target before beginning to cut rates.
His comments push against market expectations of rate cuts beginning as soon as March.
Bostic repeated his earlier stated view that he does anticipate rate reductions later this year, with two quarter percentage point cuts likely needed by the end of 2024 and an initial one coming some time in the third quarter.
But he also downplayed the risk of any imminent need to start lowering rates in order to nurse along an economy that still seems to have momentum of its own.
Minutes of the Fed’s Dec. 12-13 meeting indicated some policymakers felt the central bank may be approaching a point where further progress on controlling the pace of price increases may only come at the expense of markedly higher unemployment.
“I don’t think that’s where we are today,” Bostic said.
But he also felt that “the risk of that possibility has definitely gone up,” and said he is trying to watch ever more closely for signs that the job market’s strength is eroding.
“We have to be sensitive to the pace of change,” said Bostic, and he is focusing his conversations with business leaders on issues like whether any are planning layoffs.
“We are not seeing that now,” he said.
Source: Economy - investing.com
