Federal Reserve Bank of Atlanta President Raphael Bostic reiterated that he doesn’t think policymakers need to raise interest rates any further and that policy is restrictive enough to bring inflation back to their 2% goal.
“I think that our policy rate is at a sufficiently restrictive position to get inflation down to 2%,” Bostic said Tuesday during a conversation held at the annual convention for the American Bankers Association. “I actually don’t think we need to increase rates anymore.”
Bostic added that an unexpected change to the economic outlook could require officials to lift rates higher, but that’s not what he currently expects.
Top Fed officials are uniting around the idea that tighter financial conditions driven by a recent surge in US Treasury yields may reduce the need for additional increases in their benchmark interest rate. Yields on 10-year Treasury securities have risen about 40 basis points since the Fed’s Sept. 19-20 policy meeting — to about 4.7% Tuesday morning.
When asked how rising Treasury yields could affect policy, Bostic said Tuesday that rates are “clearly” restrictive, the economy is slowing down and more impacts from the Fed’s increases have yet to come.
Policymakers need to evaluate whether the recent increase in borrowing costs reflects investor expectations for a stronger economy or just extra compensation required to bear interest-rate risk. Parsing it will probably keep them on hold at least through their next rate decision on Nov. 1. Officials have raised their benchmark rate by more than 5 percentage points over the past year and a half, reaching a 22-year high.
The Atlanta Fed chief, who does not vote on rate decisions this year, has been among the central bank’s most dovish officials in recent months, arguing that the Fed should stop raising rates and instead focus on how long to keep them high. Bostic said last week the Fed should hold rates at elevated levels “for a long time” to bring inflation back down to its 2% target.
Asked about the recent violent attacks in Israel, Bostic said the turmoil could add new uncertainty to the outlook for the global economy, and emphasized that the Fed must be nimble and ready to adapt to changing circumstances.
This article was provided by Bloomberg News.
