The impact of higher U.S. interest rates on the economy may only begin to 'bite' in earnest this spring, an argument for the Federal Reserve to stick with 'steady' quarter-point rate increases, Atlanta Federal Reserve President Raphael Bostic said on Thursday.
President and Chief Executive Officer of the Federal Reserve Bank of Atlanta Raphael W. Bostic speaks at a European Financial Forum event in Dublin, Ireland February 13, 2019. REUTERS/Clodagh Kilcoyne/File Photo
WASHINGTON, March 2 - The impact of higher U.S. interest rates on the economy may only begin to "bite" in earnest this spring, an argument for the Federal Reserve to stick with "steady" quarter-point rate increases, Atlanta Federal Reserve President Raphael Bostic said on Thursday. "I am still very much of a mindset that slow and steady is going to be the appropriate course of action," Bostic said in comments to reporters. The cumulative effect of the Fed rate increases "should bite through the spring ... Going at a measured pace reduces the likelihood we overshoot" and damage the economy.
But Bostic at the same time said he was ready to keep lifting rates higher if inflation does not slow, and was still mulling how recent, stronger-than-anticipated inflation data might shape Fed policy. The Fed could be close to a stopping point in the rate increases that have lifted the target federal funds rate from near zero a year ago to a "restrictive" level between 4.5% and 4.75% as of February, said Bostic, who is not a voter this year on interest rate policy. He has penciled in another half percentage point of increases as likely needed, but that depends on what upcoming data show about an economy that continues to outperform expectations.
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