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Fed’s Bostic tells the FT the central bank could hike rates by a half-point if needed

President and Chief Executive Officer of the Federal Reserve Bank of Atlanta Raphael W. Bostic speaks at a European Financial Forum event in Dublin, Ireland February 13, 2019.
Clodagh Kilcoyne | Reuters

The Federal Reserve isn’t ruling out raising interest rates by half of a percent instead of the typical quarter-point move if inflation remains high, Atlanta Fed President Raphael Bostic said in an interview with the Financial Times.

Bostic reiterated to the news outlet his call for three quarter-point interest rate increases in 2022, starting in March. But he didn’t rule out that a more aggressive approach was possible if the data evolves.

“If the data say that things have evolved in a way that a 50 basis point move is required or [would] be appropriate, then I’m going to lean into that . . . If moving in successive meetings makes sense, I’ll be comfortable with that,” Bostic said in the interview.

Bostic said he would be watching for a deceleration in monthly consumer price gains and whether higher wages are meaningfully boosting prices, according to the Financial Times.

After more aggressive inflation fighting comments from Fed Chair Jerome Powell this past week, the market now expects the central bank to raise rates at least five times this year, up from four previously, according to fed funds futures.

It’s largely believed that those hikes will be in quarter-point increments though some in the market, including Bill Ackman, believe a half-point hike is needed to tame inflation cause the Fed is behind the curve. The Fed last raised rates by half of a point in May 2000.

Bostic rejected the idea that the Fed would raise rates too aggressively or in a damaging way, according to the report.

“Our policy path is not a constriction path. It’s a less accommodative path,” he told the paper. “If we do the three [interest rate increases] that I have in mind, that’ll still leave our policy in a very accommodative space.”

Read the full Financial Times report here.

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