The Fed's inflation target is 2%, and as of February,
the U.S. central bank's preferred gauge - the personal
consumption expenditures price index - was up 5% from the same
month a year ago.
Bostic's outlook holds for one more
quarter-percentage-point rate rise, which would lift the Fed's
benchmark overnight interest rate to the 5.00%-5.25% target
range. The central bank's rate-setting Federal Open Market
Committee will next meet on May 2-3, and the 25-basis-point hike
penciled in collectively by officials in March and broadly
expected by markets is also generally seen as the stopping
point.
Once that prospective final rate rise takes place, the Fed will then be able to hold steady for an extended period and see how the cumulative impact of the many rate increases are affecting the course of the economy, Bostic said. When the policy rate has peaked, "I don't have us really doing anything but monitoring the economy for the rest of this year and into 2024," he said.
Bostic is not a voting member of the FOMC this year.
He added that the banking-related financial stress that
kicked off in March and nearly derailed the Fed's move to hike
rates at the end of that month seemed to be easing.
Bank activity in the Atlanta Fed district and the
broader economy "seems to be stable and has gotten through this"
period of stress. "But you never know when the next shoe might
drop, so we're going to stay diligent," he said.
Bostic also noted that a pullback by banks and other
financial firms will likely take some pressure off the Fed, as
reduced credit will probably be a headwind to growth.
"Uncertainty is going to cause bankers themselves to be
more cautious and be more circumspect in terms of the loans that
they extend. That's going to do some of the work for us and
allow us to not have to raise interest rates as much as we might
otherwise," Bostic said.
(Reporting by Michael S. Derby; Editing by Paul Simao)
