Bostic of the Fed is in favor of raising rates a quarter point to limit risk to the economy

The effect of higher US interest rates on the economy could begin to be felt in earnest this spring, an argument for the Federal Reserve to stick with “steady” quarter-point rate hikes, the bank said on Thursday. Atlanta Federal Reserve President Raphael Bostic.

“I am still of the opinion that the proper course of action is slow and steady hikes.Bostic said in comments to reporters.

The cumulative effect of rate increases in the fed “should be felt in the spring (boreal)… Going at a measured pace reduces the likelihood that we will overdo it” and let’s damage the economy, he said.

But BosticAt the same time, he said he was prepared to continue raising rates if inflation did not slow, and that he was still considering how stronger-than-expected recent inflation data might shape the monetary policy of the fed.

The Fed could be close to a brake on rate hikes that brought the federal funds target rate from near zero a year ago to a level “restrictive” between 4.5% and 4.75% as of February, he said Bosticwhich this year has no voting rights on the central bank’s FOMC panel.

Bostic He said he can consider another half percentage point of increases as needed, but that depends on what the next data shows about an economy that continues to beat expectations.

At this point, he said, the Atlanta Fed team was divided on its views on why rapid rate hikes to date have not done more to slow consumer and business spending, and some they argued that even higher rates may be needed.

Even the business executives he consults are divided, convinced that demand for their own goods and services is certain but hoping that “the blow falls” in other parts of the economy. Others are intent on hiring more workers in a tight labor market, but also hope the pace of wage increases can be slowed.

“We want to be very deliberative“, said Bostic. “Continue raising rates for a while longer until we start to clearly see the inflation trend in a way that gives me confidence that we can get to 2%”.

The fed points to an annual increase of 2% in the Personal Consumption Expenses price index, which until January marked increases at an annual rate of 5.4%.

Source: Reuters