President of the Atlanta Federal Reserve Bank Raphael Bostic stated on Tuesday that even though the Fed has raised interest rates thus far, which have slowed the economy and reduced inflation, the U.S. central bank does not need to raise borrowing costs any more and does not anticipate a recession.
To cheers from the American Bankers Association, Bostic said, “I actually don’t think we need to increase rates anymore” to bring excessively high inflation back down to the Fed’s target of 2%.
He stated that the policy is adequately stringent and that “a lot” of the effects of the Fed’s rate hikes thus far are still to come. However, he continued, the economy also has a lot of momentum, which can “sop up” some of the impact of policy tightening and cause the economy to slow down.
According to Bostic, the confrontation between Israel and the Palestinian militant group Hamas, which erupted over the weekend, is unpredictable for both the US economy and the world economy and will force people to reevaluate their investments and market strategies.
However, he added that the epidemic and Russia’s invasion of Ukraine, among other unexpected occurrences, over the past few years have taught him to “just be ready and move into action mode” when necessary.
In case the data is not as expected, Bostic stated, “We might have to increase (the Fed policy rate), but that’s not my outlook right now, and that’s not my expectation.”
One of the Fed’s more dovish members, Bostic has long advocated for an end to interest rate hikes. As of last month, the majority of his colleagues still held the view that the Fed would need to raise borrowing costs by a quarter of a percentage point before the year is up.
Since longer-term Treasury rates have increased, several Fed members seem to have softened their stance in response to the possibility that the Fed’s tighter policy may be partially responsible for the increase.