Federal Reserve Bank of Atlanta President Raphael Bostic urged the US central bank to be cautious not to overtighten monetary policy with inflation poised to continue receding.
(Bloomberg) — Federal Reserve Bank of Atlanta President Raphael Bostic urged the US central bank to be cautious not to overtighten monetary policy with inflation poised to continue receding.
“There has been significant progress in the battle,” Bostic said Tuesday in a press briefing. “Inflation is well off of its highs that we saw in the last year. And recent numbers have come in promising in ways that suggest that we might be seeing continued declines.”
Bostic, who is not a voter this year on the central bank’s rate-setting Federal Open Market Committee, said he doesn’t currently expect a rate hike will be needed at the next policy meeting in September.
The Atlanta Fed chief said he would have likely “grudgingly” supported last week’s rate hike if he were a voter, even though he had publicly questioned the need for one beforehand. The Fed at its July 25-26 meeting raised its benchmark interest rate by a quarter percentage point, bringing it to a range of 5.25% to 5.5%, the highest level in 22 years.
“Things to date seem to be evolving in a way that’s consistent with the notion of an orderly slowdown, which is quite promising,” he said. “In terms of policy, I think all of these facts argue for us being cautious, patient and resolute.”
Bostic said that while his baseline view hasn’t changed, the Fed will get lots of additional data by September, and he would be willing to adjust his view for that meeting if the data comes in contrary to his expectations.
“I think we are in a phase now where there is some risk of us overtightening. And so we’ve just got to have that in mind,” he said. “If we can be appropriately cautious, I think we have the opportunity to minimize the damage that we see on the employment side.”
A report Friday showed the Fed’s preferred inflation gauge, the personal consumption expenditures price index, rose 3% from a year earlier in June, marking the smallest increase in more than two years. Core prices — which exclude food and energy and are regarded as a more reliable signal of underlying inflation — advanced 4.1%, also the least since 2021.
The labor market has also shown signs of moderating. US job openings fell in June to the lowest level since April 2021, a Bureau of Labor Statistics report showed Tuesday. The so-called quits rate, which measures how many workers voluntarily left their jobs as a share of total employment, fell to 2.4%, matching the lowest since February 2021.
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