justify further rate hikes is higher than it was a few months ago."
Federal Reserve Bank of Atlanta President Raphael Bostic said he supports holding the central bank's target-rate level for the rest of 2023 and that it's prudent to give time for inflation to ease in response to past moves.
"Letting restrictive policy work for a while is prudent because the policy has been truly restrictive for less than a year, and it takes time for monetary policy changes to meaningfully influence economic activity," Bostic said in an online commentary published Wednesday. "We have good reasons to expect our policy tightening will be increasingly effective in coming months, which would accelerate progress to that end."
In a later Yahoo Finance interview, Bostic said, "My baseline is that we should stay at this level for the rest of the year."
By contrast, Federal Reserve Chair Jerome Powell, in congressional testimony, said policymakers expect interest rates will need to move higher to reduce U.S. growth and contain price pressures, even though they held rates steady at their meeting last week. He cited the committee's forecast for two more hikes this year.
Bostic said scholars and historians of the Fed have reviewed past Fed hiking cycles and often concluded the central bank "has always gone like one or two steps further than they absolutely needed to."
In his commentary, Bostic said he agreed with the view that "the bar to justify further rate hikes is higher than it was a few months ago."
The Atlanta Fed president pointed out that as inflation slows, real interest rates increase so that monetary policy effectively becomes tighter.
"I think of this dynamic as 'passive tightening,' and it should help us continue on the path to our target if recent inflation trends persist," he said.
Chicago Fed President Austan Goolsbee said earlier that the decision to hold rates steady last week was a "close call" as central bank officials try to figure out whether they've tightened enough to ease inflation.
Goolsbee, who took office in January, has voiced more concern about tightening financial conditions than many of his colleagues following the collapse of four U.S. lenders in recent months.
--With assistance from Sam Kim.
