The Federal Reserve (Fed) needs to continue raising the benchmark interest rate until its level reaches 5-5.25% per year, says Rafael Bostic, president of the Federal Reserve Bank (FRB) of Atlanta.
The Fed rate is currently at 4.5-4.75%.
Bostick does not expect the Fed to cut the rate in 2023. In his view, the central bank will need to hold the 5-5.25% rate range for much of 2024.
He noted that despite signals of declining price pressures in the U.S., the time for the U.S. central bank to change course has not yet come.
“History shows that if we ease up on inflation before it is fully suppressed, it could flare up again,” Bostick said in an article published on the Atlanta Fed’s Web site. – We have to beat inflation now.”
Minneapolis Fed President Neel Kashkari said Wednesday at an event in South Dakota that he has not yet decided whether a 25 basis point (bps) or 50 bps increase in the Federal Reserve rate in March should be significant.
He said he had projected in December that the rate cap for the current cycle should be 5.4%. The Fed chiefs’ median forecast from the December meeting was that the rate would reach 5.1% by the end of 2023.
Kashkari said Wednesday that he is leaning toward raising his estimate of the peak rate.
A key factor that will influence the Fed’s future decisions will be new projections for U.S. inflation, Kashkari said. The Fed will release those projections along with the results of its March meeting.
Kashkari this year has a vote on the Federal Open Market Committee (FOMC), Bostick does not.
