Atlanta Federal Reserve Bank President Raphael Bostic expressed optimism about the inflation outlook, suggesting the central bank's interest rate hike cycle may be nearing an end. Bostic's comments, made in an essay on Wednesday, pointed to the possibility of a pause in policy tightening as the economy begins to feel the full impact of earlier increases.
Bostic emphasized the long-term effects of the Fed's restrictive monetary policies, which resulted in a significant third-quarter GDP growth of 5.2%. However, he questioned the sustainability of this growth under current financial constraints and noted signs of consumer resistance to price increases. His observations suggest businesses are losing pricing power and consumer spending could slow as wage growth stagnates and savings decline during the pandemic.
Atlanta Fed research predicts a gradual decline in inflation, with inflation expected to approach the central bank's 2% target by the end of 2025. This forecast is in line with Bostic's previous comments at a conference. conference in Cape Town, where he advocated policy patience and warned against further interest rate hikes to avoid exacerbating economic tensions.
Conflicting views within the Federal Reserve emerged on Tuesday, with Governor Michelle Bowman endorsing additional interest rate increases to quickly achieve the inflation target, while Governor Christopher Waller expressed satisfied with the current rate, pending further data to confirm the trend.
The Federal Open Market Committee (FOMC) has kept interest rates steady at historic highs of 5.25%-5.50%, with some members considering another increase at their upcoming December meeting. next. Even so, the Atlanta Fed's analysis favors continued disinflation, which could negate the need for further increases if the trend holds as Bostic predicts.
