Atlanta Federal Reserve President Raphael Bostic said on Monday that he is not concerned about the overheating of the US economy, although he believes that growth may occur faster than many expect.
In an estimate well ahead of most of his colleagues, Bostic, a voting member of the Federal Open Market Committee, recently called attention to saying he thinks the Fed may have to raise interest rates as early as mid-2022.
He based this on his expectation that the economy could recover from the Coivd-19 recession quickly, once vaccinations became more widespread and the stimulus that was being offered began to go to more people in need.
Most Fed officials, while forecasting strong growth later this year, do not expect rate hikes until 2023.
“This recession was unlike anything we’ve had before, so the recovery will be like that,” Bostic told CNBC’s Closing Bell. “I think there are some things here. When we talk about 2023, 2024, this is something out of the ordinary and a lot of things are going to happen that can happen one way or the other.”
“Many of the recent developments have been positive,” he added. “We must be open to the possibility that things can happen more forcefully than otherwise.”
So far, Congress has allocated about $ 5 trillion in relief spending to the economy, and the Fed has contributed near-zero short-term loan rates and more than $ 3 trillion in liquidity through its cash purchase program. large-scale assets, also known as quantitative easing.
Some market participants recently wondered when the Fed could start pulling back on policy accommodation now that vaccines have started, more fiscal stimulus is underway and signs of inflation are slowly starting to increase.
Although he sees interest rate hikes perhaps a year and a half from now, Bostic added that he believes the economy still needs a lot of help now.
“The main objective for this is to keep people as whole as possible,” said Bostic. “We know that when you lose so many jobs, there are gaps to fill.”
The Fed has pledged to keep rates low and increase liquidity, even if inflation modestly exceeds the central bank’s 2% target. Bostic said he thinks this is important, considering the Fed’s focus on an “inclusive” employment mandate that seeks as broad-based gains as possible between racial and income groups.
Although the Fed has said it will tolerate higher inflation, Bostic said it still sees no worrying sign about price pressures.
“It is not really the level of inflation, but rather the trajectory as we move forward, that I will focus on for answers on whether the economy may be moving to places that make me uncomfortable,” he said.
Bostic also said he has recently seen price fluctuations in the stock market for companies like GameStop and others, but said he thinks this is more of a regulatory issue than a concern for monetary policy.