By Greg Robb
The Federal Reserve should get its benchmark rate to between 4% and 4.5% by December and then pause, Atlanta Fed President Raphael Bostic said Wednesday.
“Ideally, I would like to reach a point where policy is moderately restrictive — between 4% and 4.5% by the end of this year — and then hold at that level and see how the economy and prices react,” Bostic said in a speech at Northwestern University.
Some Fed official want to go a little further and raise the central bank’s benchmark rate up to a range of 4.5%-4.75% in early 2023 before pausing.
While a pause might be in order, the Atlanta Fed president stressed he was not advocating a quick turn toward accommodation. To those who think the Fed is going to begin cutting rates in 2023, Bostic replied: “Not so fast.”
Bostic will not be a voting member of the Fed’s interest-rate committee until 2024.
Earlier Wednesday, San Francisco Fed President Mary Daly also said that investors who are betting on rate cuts in 2023 are wrong.
In his speech, Bostic said that the U.S. economy was still “in the inflationary woods.”
“The past couple of monthly inflation prints produced a mixed bag, with some evidence that the pace of month-to-month price increases has slowed. But the August inflation reports were a sobering reminder that price pressures remain broad and stubborn,” Bostic said.
It will take some time to bring inflation down to 2%, he said.
Still, there is some evidence that the Fed’s rate hikes this year are already working, he said.
“The FOMC’s tightening may have already sapped momentum from soaring housing prices,” Bostic said. Mortgage rates hit their highest level in 16 years this week.
Stocks /zigman2/quotes/210598065/realtime DJIA -1.45% /zigman2/quotes/210599714/realtime SPX -1.54% closed slightly lower on Wednesday after two days of solid gains. The yield on the 10-year Treasury note /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +0.67% rebounded to 3.75%.