“Tighter money has not yet constrained business activity enough to seriously dent inflation,” Bostic said in an essay to be posted on the Atlanta Fed’s website. “I anticipate that more rate hikes will be needed” to get policy sufficiently restrictive to return inflation to the Fed’s 2% target, he said.
Because it will likely take months before the full impact of higher interest rates will be felt on inflation “we must look to economic signals other than inflation as guideposts along our path,” Bostic said.
But labor markets remain tight, keeping upward pressure on wages, and though there has been some easing in goods prices, services inflation continues to tick up, Bostic said.
“Right now, job number one for the FOMC is to tame inflation that is unacceptably high,” Bostic said, referring to the U.S. central bank’s policy-setting Federal Open Market Committee. The Fed’s preferred measure of inflation is running at more than three times its 2% target.
Once the Fed’s benchmark overnight interest rate, now in the 3.75%-4.00% range, gets to an appropriately restrictive level, the central bank will need to keep it there “until we see convincing evidence that inflation is firmly on track” to 2%, Bostic said.
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