Jan 9, 2023
Fed’s Bostic Favors Holding Rates Above 5% for ‘a Long Time’
(Bloomberg) -- Atlanta Fed President Raphael Bostic said the central bank should raise interest rates above 5% by early in the second quarter and then go on hold for “a long time.”
“We are just going to have to hold our resolve,” he told the Atlanta Rotary Club on Monday. Bostic said the Fed was committed to tackling high inflation and this warrants raising interest rates into a 5% to 5.25% range to squeeze excess demand out of the economy.
Asked by the moderator how long he saw rates above 5%, Bostic said: “Three words: a long time.”
“I am not a pivot guy. I think we should pause and hold there, and let the policy work,” he said.
The comments echoed remarks Bostic made Friday.
Fed officials raised interest rates by a half-point in December, extending their aggressive tightening campaign and bringing the target on their benchmark rate to a target range of 4.25% to 4.5%. The move followed four larger hikes of 75 basis points to curb inflation running well above their 2% target.
Policymakers say their next rate move will be determined by economic data, including inflation and employment reports. Officials will meet next on Jan. 31 and Feb. 1.
Labor Department data released Friday showed that the US economy added 223,000 jobs in December and the unemployment rate dropped to 3.5%. At the same time, wage growth slowed, which supports the odds for a soft landing for the US economy, where the Fed manages to cool inflation while minimizing pain in the labor market. US average hourly earnings rose 0.3% in December from a month earlier and 4.6% from December 2021 — both less than expected.
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