ISTANBUL: Atlanta Fed President Raphael Bostic said the US Federal Reserve cannot wait until inflation falling all the way to its 2% target to begin interest rate cuts.
“We must not maintain a restrictive policy stance for too long,” he wrote in an article published on the Atlanta Fed website. “I believe we cannot wait until inflation has actually fallen all the way to 2 percent to begin removing restriction because that would risk labor market disruptions that could inflict unnecessary pain and suffering.”
Bostic said the US labor market continues to weaken, but it is not too weak yet, noting the unemployment rate has ticked up this year to 4.3%, close to the Federal Open Market Committee’s (FOMC) long-run projection of 4.2%.
He said high wage growth coming out of the coronavirus pandemic is pulling back to a level “more conducive” to price stability.
“I am all for healthy wage increases for everyone. The problem comes when pay soars so rapidly that it can lead firms to boost prices to cover rising labor
costs, especially in the services sector that makes up the bulk of the US economy,” he explained.
Bostic said he is not prepared to declare victory over inflation, and that risks to meeting the Fed’s price stability mandate still remain.
The Fed’s next two-day meeting will conclude on Sept. 18 when it is widely expected to begin lowering interest rates.
Source: Anadolu Agency