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Atlanta Fed President Expects Higher Rates to Remain -- WSJ

The Wall Street Journal · 01/06/2023 16:17

By Austen Hufford

NEW ORLEANS -- Atlanta Fed President Raphael Bostic said he expects the central bank to keep raising interest rates this year and then hold them at some undetermined higher level into next year to combat inflation.

Mr. Bostic said Friday he anticipates the Federal Reserve lifting its benchmark federal-funds rate to at least 5% this year from its current range between 4.25% and 4.5% -- which is a 15-year high.

"I don't think we'll need to go a lot above 5%, but there is still more work to do," he said here on a panel organized by the National Association for Business Economics.

He said that once he and his Fed colleagues decide how high to raise the rate, they should keep it at that level into 2024. They want higher borrowing costs to weaken price pressures by slowing hiring, spending and investment, which should restrict economic growth.

"We will just stay there and let that policy posture hold for an extended period of time," he said. "We're going to really let the restrictiveness hold."

Fed officials raised the fed-funds rate rapidly last year, including by 0.5 percentage point in December, following four straight increases of 0.75 point.

Officials have kept their options open for their Jan. 31-Feb. 1 meeting by declining so far to spell out what might lead them to approve another half-point rate rise or to step down to a more traditional 0.25-point increase.

"I am very open to both," Mr. Bostic said.

Mr. Bostic said he expects U.S. economic growth and inflation to slow this year. "How the economy evolves will shape how much the Fed has to do," he said.

Consumer prices climbed 7.1% in November from a year before, down sharply from their 7.7% increase in the 12 months through October, according to the Labor Department's most widely followed inflation gauge.

That extended a trend of falling inflation since the recent peak of 9.1% in June. The November reading, however, remained well above the 2.1% average rate in the three years before the pandemic hit the U.S. economy in 2020.

Mr. Bostic spoke a few hours after the Labor Department released a report showing the U.S. unemployment rate fell to 3.5% in December -- matching a half-century low -- while job growth remained robust, though cooler than in November.

"The labor market has been stronger than I expected. Inflation has been more persistent than I expected," he said.

"It's still not easy to find workers, but it's easier than it was in the summertime," he said. "Those are all signs of the economy slowing in a pretty positive way."

Write to Austen Hufford at austen.hufford@wsj.com

(END) Dow Jones Newswires

January 06, 2023 16:17 ET (21:17 GMT)

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