The Atlanta Federal Reserve’s Stance on Interest Rates and Inflation

According to Raphael Bostic, the chief of the Atlanta Federal Reserve, further increases in interest rates may not be necessary to bring inflation back down to pre-pandemic levels. Bostic’s comments were made during an event in Atlanta on Tuesday.

The annual rate of U.S. inflation has decreased to 3.7% from its peak of 9.1% in 2022, as measured by the consumer-price index.

The Federal Reserve’s goal is to reduce inflation to 2% per year, although Bostic emphasized that achieving this target does not have to happen immediately. The central bank can afford to be patient as long as inflation continues to slow down.

Bostic also expressed his willingness to engage in a “robust” debate about whether a 2% inflation target is appropriate. However, he believes that this discussion should take place after the Fed has achieved its current goal.

In late September, the Fed decided not to raise interest rates further, but it did leave the possibility open for one more increase this year if inflation fails to continue slowing down.

While twelve of the Fed’s governors and regional bank presidents predict another rate hike in 2023, seven do not see a need for further action. Bostic falls into this camp, as he is concerned that additional rate hikes could lead to an economic recession.

There are differing opinions among senior Fed officials regarding the next steps. Some, like Cleveland Fed President Loretta Mester and Fed Gov. Michelle Bowman, advocate for a slightly more aggressive approach, believing that the economy can handle it.

Over the past year and a half, the central bank has steadily raised U.S. interest rates in an attempt to curb inflation. The key short-term interest rate has increased from near zero to a top range of 5.5% in March 2022.

However, one common ground among senior Fed officials is the need to maintain high interest rates for an extended period to ensure that inflation is fully under control.

Bostic suggests that the Fed should maintain current interest rates for a “long time.” It is worth noting that he is not a voting member of the Fed committee responsible for setting interest rates this year.

“I am not in a hurry to raise, but I am not in a hurry to reduce either,” Bostic stated.