Atlanta Federal Reserve President Raphael Bostic said Monday that he is not worried about the overheating of the U.S. economy, although he thinks growth could happen faster than many expect.
In an estimate ahead of most of his colleagues, Bostic, a voting member of the Federal Public Markets Committee, recently drew attention because he believes the Fed may need to raise interest rates as soon as mid-2022.
He based this on his expectation that the economy could recover quickly from the Coivd-19 recession as soon as vaccinations widened and the stimulus being pumped began to go to more people in need.
Although most Fed officials expect strong growth later this year, they do not see rate hikes coming until 2023.
“This recession was different than we’ve ever had, so the recovery is going to be like that,” Bostic told CNBC’s “Closing Bell.” “I think here are a few things. If we’re talking about 2023, 2024, then there are a lot of things that could happen in one way or another.”
“Many of the recent developments have been positive,” he added. “We need to be open to the possibility that things could happen stronger than they would otherwise.”
So far, Congress has allocated about $ 5 billion in aid spending to the economy, and the Fed has contributed nearly zero short-term loans and more than $ 3 billion in liquidity through its large-scale asset purchase program, also known as quantitative easing.
Some market participants have recently wondered when the Fed might start withdrawing from policy accommodation now that vaccines have started, more fiscal stimulus is likely on the way and signs of inflation are slowly starting to increase.
Although he sees rate hikes perhaps a year and a half further, Bostic added that he believes the economy still needs a lot of help now.
“The main purpose of this is to keep people as whole as possible,” Bostic said. “We know that when you lose so many jobs, there will be holes.”
The Fed has undertaken to keep interest rates low and keep liquidity pumping, even if the central bank’s target of 2% is modest. Bostic said he believes this is important as the Fed’s focus is on an ‘inclusive’ mandate for jobs that seeks to be as broad as possible within racial and income groups.
While the Fed has said it will tolerate higher inflation, Bostic said it has yet to see any worrying signs of price pressure.
“It’s not really the level of inflation, but rather the trajectory we are going to focus on going forward to get answers or whether the economy might move to places that make me uncomfortable,” he said.
Bostic also said that it has been monitoring price fluctuations in the stock market for GameStop and others, among others, but he believes that this is rather a regulatory issue and not a concern for monetary policy.