Atlanta Federal Reserve President Raphael Bostic said on Wednesday that inflation “remains very high” in the United States, despite recent signs of moderation in its core. .
In an analysis published on the district’s website, he defended that interest rates be raised to a level between 5.00% and 5.25% “and kept there until 2024”, with a tighter monetary policy, allowing for a better balance between supply and aggregate demand and, consequently, lower inflation.
Without voting rights in this year’s monetary policy decisions, the leader reiterated in the text the Fed’s commitment to the 2% target.
In addition, he returned to historical examples, for example, from the 1970s, to argue against a premature relaxation of monetary policy, which ended up having “disastrous results” for the economy. “We don’t want to repeat that, so we need to defeat inflation now.”
Bostic said doing so without imposing “severe economic pain” requires a “delicate balance”. For him, the demand and supply for work in the US are still “misaligned”. Interest rates, on the other hand, still do not influence the activity of companies sufficiently, he added.
Consumer spending has remained robust over the last year, and Gross Domestic Product (GDP) grew above expectations in the second half of 2022.
Looking ahead, business-to-business contacts do not expect “severe deterioration”, he noted. “So there is more work – in the form of interest rate hikes – to do,” she said.
For Bostic, inflation had a recent retreat, but at a still high level. In addition, the director highlighted the psychological factor as “crucial” for inflation expectations, and said that the Fed is also aware of this.
Source: CNN Brasil
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