WASHINGTON: The U.S. Federal Reserve can stick to half point interest rate hikes for the next two to three meetings then assess how the economy and inflation are responding before deciding whether further rises are needed, the Atlanta Fed president said.
The half point increase approved by the Fed last week “is already a pretty aggressive move. I don’t think we need to be moving even more aggressively,” Raphael Bostic said in comments to Bloomberg on Monday that appear to rule out a larger three-quarter point hike.
“I think we can stay at this pace and this cadence and really see how the markets evolve … We are going to move a couple times, maybe two, maybe three times, see how the economy responds, see if inflation continues to move closer to our 2% target, then we can take a pause and see how things are going.”
The rate policy path outlined by Bostic is in line with that outlined by Fed Chair Jerome Powell at his press conference last week when he said there was support for half-point hikes at the next couple of Fed meetings, but that the larger increases were not being actively considered.
Investors and many economists feel the Fed will be forced into an even more aggressive series of rate increases to tame inflation that is running at multi-decade highs.
But Bostic said he held out hope that some of the supply chain and other factors that have been adding to the pace of price increases will turn in the Fed’s favor - a nod to the Fed’s earlier language that high inflation would prove transitory.
“My hope is that a lot of the things that are out of our control, things like supply chain disruptions and the like are going to get to a better place,” Bostic said. “If we start to see movement on the supply side that means we have to push less on demand” through rate increases.