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Atlanta Federal Reserve President Raphael Bostic said Wednesday that the central bank expects to raise interest rates three or four times this year, but that no specific plan has been set.
Speaking on CNBC’s “Squawk Box,” the policymaker expressed a less aggressive stance on rates than the market.
At the moment, market expectations are for at least five, and probably six, 0.25 percentage point rises. As the central bank battles inflation, which is at its highest level in almost 40 years, Bank of America recently forecasted seven measures. Bostic drew notice recently when he stated that the initial step could have to be 0.5 percentage points, or 50 basis points, in an interview with the Financial Times.
At its March meeting, the Fed is expected to implement its first rate raise in more than three years. In his CNBC interview, Bostic did not promise to moving that rapidly.
“I’m thinking about a 25-basis-point viewpoint for myself,” he remarked. “However, I want everyone to realise that all options are on the table, and I don’t want anyone to believe that we’re stuck on a specific path in terms of how our rates must change over time.” We’re going to rely on the facts to determine whether a 50-basis-point or 25-basis-point rise is appropriate.”
In a separate appearance on Wednesday, Cleveland Fed President Loretta Mester stated that she expects a rate raise in March, although she did not specify what rate she would be comfortable with.
“While the Omicron version may weigh on activity in the short term,” she said in a lecture for the European Economics and Financial Center, “the high levels of inflation and tightness in labour markets create a strong argument to begin recalibrating the stance of monetary policy.” “I favour beginning to reduce accommodation by putting the funds rate up in March, barring an unforeseen change in the economy.”
Pace of inflation
Bostic’s remarks came only one day before the Labor Department releases its latest inflation data, which is based on the consumer price index for January. According to economists polled by Dow Jones, the 12-month rate will be 7.2 percent, the quickest since early 1982.
Bostic, on the other hand, is more concerned about the monthly acceleration, which is expected to be 0.4 percent, or somewhat slower than December.
If the monthly rate can remain stable, it will indicate that inflation is under control and the Fed will not need to be as hawkish.
Markets anticipate the Fed to start releasing revenues from those assets shortly, with the main issue being how much the balance sheet will decrease.
According to Bostic, the early phases might be aggressive.
Bostic also stated that he is optimistic about growth for the rest of the year and does not believe the Fed will need to take any steps to halt the economy.
Mester also believes the Fed may be proactive in its balance sheet reduction.