© Reuters Bostic Fed: Rate hikes poised to slow Terminal rate expected to be near 5%
November 20 news from the Financial Associated Press (edited by Zhou Ziyi)Atlanta Fed President Raphael Bostic said on Saturday that he was prepared to slow the pace of rate hikes, arguing that the central bank would need to raise rates by another 100 basis points to fight inflation.
Speaking at the Southern Economic Association on Saturday, Bostic said, “If the economy develops as I expect, I think further tightening will be required at 75-100 basis points … I believe that is the level of interest rates Sufficient to keep inflation under control for a reasonable period of time.”
“My bottom line is that the macro economy will be strong enough for us to be able to tighten policy without unduly disrupting output and employment,” Bostic said.
Where do the interest rates end?
According to Bostic, this would leave the Fed’s final interest rate set in a range of 4.75% to 5%.slightly below the final interest rate generally expected by the market.
Earlier, CME Group’s “Fed Watch” tool showed that the federal funds rate has a high probability of rising to 5%-5.25%.
At the November meeting, the Federal Reserve raised interest rates by 75 basis points for the fourth time in a row, The current federal funds rate is set in the range of 3.75%-4%.
But his colleagues took a more hawkish view. St Louis Fed President James Bullard, known as the “Eagle King”, said on Thursday that the Fed’s benchmark interest rate will need to be raised further to a level sufficient to bring down inflation, calling for an interest rate of at least 5%. to 5.25%.
Bullard also said a tightening assumption would likely need to rise to 7 percent to put downward pressure on inflation.
How to raise interest rates in the future?
The Fed is widely expected to raise interest rates by 50 basis points at its December meeting, a view also supported by some Fed officials, including Bostic.
Some officials also pointed out that there are still variables to raise interest rates by 50 basis points, mainly depending on the crisis situation.
“In terms of the cadence (of the rises), if the economy develops as expected in the coming weeks,I would be happy to drop my 75 basis point rate hike view.”
It can be seen that Bostic’s opinion has changed, from “raising interest rates by 75 basis points” to “continue to raise interest rates to the range of 4.75%-5% in the next few meetings.”
He also said that at some point in the future the Fed will need to pause its rate hikes in order to “let the dynamics of the economy play out.” Because he estimates that the impact of the Fed’s rate hike on the economy could take 12 to 24 months to “fully materialize.”
At the same time, Bostic also warned that the Fed should guard against any temptation to reverse interest rates until inflation falls to its 2% target, even if the economy shows signs of “significant weakening. “
Data now shows that although US inflation figures for October were weaker than expected, the key consumer price index remains around 2-3 times the Fed’s target.
