Federal Reserve Bank of Atlanta President Raphael Bostic said the central bank could decide to slow its asset purchases in the next few months and he favored lifting interest rates in 2022 in response to a faster-than expected recovery from Covid-19 pandemic.
“Given the upside surprises in recent data points, I have pulled forward my projection for our first move to late 2022,” Bostic told reporters Wednesday following a speech to the Russell Innovation Center for Entrepreneurs. ‘’I have two moves in 2023,” he said.
The Fed last week published economic projections showing 13 of 18 participants on the policy-setting Federal Open Market Committee thought it would probably be appropriate to begin raising interest rates from their current near-zero levels by the end of 2023. That marked an increase from just seven participants who thought such a timeline for rate hikes would be appropriate back in March, the last time updated projections were published.
“I think the economy is well on its way to recovering from the pandemic,” Bostic told reporters. “Much of the data recently has come in stronger than I expected. GDP is on a stronger trajectory, inflation has been higher and I recognize is well above our target.”
In his forecasts, Bostic said he is looking for growth of 7% this year and inflation for the year to be 3.4%.
He said the economy is making headway toward the standard of ‘substantial further progress’ set by the Fed to start scaling back its monthly asset purchases.
“In my view we are close to meeting that standard,” he said. “If the next few months print at levels comparable to what we have seen recently, I feel we will have reached that standard. Given that is a distinct possibility I think it is fully appropriate to be planning to start the tapering process.”
The Atlanta Fed chief also said the recent surge in inflation is likely to last longer than he originally expected, but should ease after this year as many of factors influencing price pressures are “transitory.” The central bank has an average 2% inflation target.
‘’The economy is rebounding strongly,” Bostic said. “Conditions are in place for us to get to a consistent level of inflation that is slightly above our target.”
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