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Bostic sees no 75 bps rate hike, hopeful inflation cools

Economy May 09, 2022 03:37PM ET
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By Howard Schneider

(Reuters) -Atlanta Federal Reserve President Raphael Bostic on Monday said he expects the U.S. central bank will deliver two or three more half-percentage-point interest rate hikes but won't need to use anything bigger, noting some hopeful signs on inflation.

"I would say that (a 75-basis-point rate hike) is a low probability outcome given what I expect will happen in the economy over the next three to four months," Bostic told Reuters during an interview on Twitter (NYSE:TWTR) Spaces.

"A number of supply chain challenges that have really been just persistent through the pandemic are starting to show signs of easing," he said.

Trucking companies are no longer turning down business, as they were earlier, and shipping bottlenecks are easing, he said.

Meanwhile, Bostic said he sees as yet unrealized downside risks to demand from the war in Ukraine and simply as households react to high inflation by potentially pulling back on spending.

"I am going to stay open to the possibility that those sorts of adjustments will work in concert with our policy movements and get us to a place where inflation is approaching our policy ... target at a faster rate than maybe some of my colleagues are projecting," Bostic said. "In which case we will not need to do nearly as much."

The Fed last week raised its target for overnight bank-to-bank lending by a half a percentage point to 0.75%-1%.

Fed Chair Jerome Powell said two more such rate hikes are likely at the U.S. central bank's coming policy meetings as policymakers try to decisively curb inflation that is running at a 40-year high.

"That's very aggressive by historic standards," Bostic said. "I'm hopeful that will actually do the job in terms of really taking the reins and wrestling inflation closer to our target."

A U.S. government report Wednesday is expected to show consumer price inflation slowed slightly in April, and Bostic said he will be watching month to month data closely.

At the same time, he said, the labor market has a lot of momentum.

That leaves room for a scenario under which rate hikes slow demand and inflation without forcing businesses to resort to layoffs or stop raising wages.

"If we start to see signs that businesses are thinking about reducing their forces that would be a signal that would be quite meaningful, and it would be quite a departure from really anything we hear today," Bostic said.

The April unemployment rate was steady at 3.6% as businesses hired more workers than expected, the latest government job market report showed on Friday.

Bostic sees no 75 bps rate hike, hopeful inflation cools
 

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Comments (4)
Jose Cabreja
Jose Cabreja May 09, 2022 8:51PM ET
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🤡🤡🤡
Roger Miller
Roger Miller May 09, 2022 3:54PM ET
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I still want to know how they got it so wrong when they claimed the inflation was transitory.  Did they make a mistake, even though everyone else disagreed with them at the time, or were they being deceptive?
Jose Cabreja
Jose Cabreja May 09, 2022 3:54PM ET
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Fed has never been wrong..they have their owned agenda..Print $ n higher inflation by any means necessary. more debt the better for them.
Edward Chong
Edward Chong May 09, 2022 2:57PM ET
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this guy is crazy. shipping bottleneck just started look at what shanghai is doing.
Louis Lipps
Louis Lipps May 09, 2022 2:56PM ET
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In other words what Bostic is saying is buy stocks in August at levels 20-30% lower than today.
 
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