Bostic (Fed): Smaller rate hike in September as PCE eases

The member of the Board of Directors took a position in favor of a milder increase in Fed interest rates. and head of the Atlanta branch, Rafael Bostic, shortly after data showed that the personal expenditure index (PCE) – the Bank’s preferred gauge of inflation – was slowing.

In particular, in his statements after the announcement of the data, R. Bostic said that “I tend towards 50 basis points for September”, pointing out, however, that “there are still data that we expect to see before the September meeting”.

It is recalled that the federal bank has already proceeded with two consecutive giant increases in its interest rates by 75 basis points (0.75%) in the last two meetings and bets on the related futures are currently showing a marginal lead with 51% on a third of the same order in September .

However, as R. Bostic pointed out, the structural index of personal spending (which increased by just 0.1% in August moving to 4.6% year-on-year), the economy appears to be responding to the Fed’s rate hike, with the same adding that “we have to be careful not to overreact.”

In any case, however, he argued that the bank’s policy should become restrictive by the end of the year, which means an overall increase in interest rates in the range of 3.5% – 3.75% (from 2.25% -2.5% which is today).

“The aim is to get to a stable, more restrictive stance as soon as possible and to maintain it,” he said.

At the same time, R. Bostic clarified that at this stage it is premature to discuss any reduction in Fed interest rates in 2023.