By Michael S. Derby
(Reuters) - Federal Reserve Bank of Atlanta President Raphael Bostic reiterated on Thursday his belief that the likely path of inflation will save the central bank from having to raise its short-term rate target again.
“We have reached a level of the nominal federal funds rate that should be sufficient to move inflation toward the 2% target over an acceptable timeframe,” Bostic said in the text of a speech prepared for delivery before a group in Dublin, Ireland. He said his baseline case is that after the central bank held rates steady earlier this month, it will be able to stay at this level for the foreseeable future.
“The data, survey results, and on-the-ground intelligence constitute a reasonable case that gradual disinflation will continue,” Bostic said, adding “I believe that will happen, even if the Committee does not increase the federal funds rate.”
Bostic noted that if the economy surprised him and inflation did not cool as he expects, it would put rate rises back on the table. He also said that his current outlook does not see the Fed cutting rates this year or next.
The bank president, who is not currently a voting member of the rate-setting Federal Open Market Committee, also said “my baseline forecast remains that we can meet our inflation objective without a severe economic downturn.”
Bostic spoke in the wake a series of comments by Fed Chair Jerome Powell. The Fed leader suggested more rate rises are likely, as he pointed to Fed forecasts released at the June FOMC meeting that indicate officials collectively see rates rising another half percentage point from the current federal funds target rate range of 5%-5.25%. The Fed has been boosting rates to cool inflation and in comments Wednesday, Powell said hitting the 2% inflation target is unlikely to happen until 2025.