The Fed’s Battle Against Inflation Isn’t Over: Atlanta and Minneapolis Fed Bosses

May 15 (Reuters) – Two U.S. Federal Reserve officials said on Monday that the situation would require the continuation of tight monetary policy rather than the other way around, citing stubbornly high inflation.

Raphael Bostic, head of the Federal Reserve Bank of Atlanta, said he does not expect interest rates to drop in 2023 as inflation is likely to be more resilient than market participants believe. According to him, if there is anything to expect, it is likely that the regulator will have to go for a further hike.

“The right policy is to just wait and see how much the economy slows down as a result of the policy moves we’ve taken,” Bostic told CNBC, noting that for several months he believed the Fed would have to raise short-term interest rates to the 5%-5 range, 25% where they are now.

At the same time, he stressed that there is a definite progress in terms of inflation, encouraging the latest data on the consumer price index, which increased by 4.9% compared to the previous year against 5% a month earlier.

At the same time, he admits that further hikes, not cuts, are possible: “If there is a need for action, then in my opinion it will be the need for further hikes, not cuts.”

Meanwhile, Minneapolis Federal Reserve Bank Governor Neil Kashkari said on Monday that the US labor market is still overheated and inflation is too high despite interest rate hikes.

“(The Fed) still has a long way to go,” Kashkari told the Minnesota Transportation Conference & EXPO, noting that while inflation is starting to come down, the Fed’s 2% target is still a long way off.

He added that the central bank “shouldn’t be fooled” by several months of good data.

At the same time, Austan Goolsby, president of the Federal Reserve Bank of Chicago, was more cautious.

He noted that his decision to support an interest rate hike at the recent US central bank meeting in May was not as clear-cut as he considered the implications of tightening lending conditions in the wake of the recent banking crisis.

“What made it difficult for me was a big question mark over how it will affect lending conditions,” Goolsby told CNBC, adding that the situation had not noticeably worsened since the previous Fed meeting.

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(Dan Burns, Ann Safir, translated by Elizaveta Zhuravleva)