RIP stock markets? Fed's Bostic doesn't see any rate cuts in 2023
Raphael Bostic, the president of the Federal Reserve Bank of Atlanta, said he doesn't expect any interest-rate cuts this year because inflation is likely to be stickier than those in markets believe
- May 15, 2023,
- Updated May 15, 2023 8:52 PM IST
In what could be a near-term death knell for stock markets, Atlanta Fed President Raphel Bostic said that he doesn’t foresee rate cuts in 2023 even if a recession hits. “If there’s going to be a bias to action, for me, would be a bias to increase a little further as opposed to cut,” he told CNBC while speaking at Atlanta Fed’s Financial Markets Conference.
“For me, inflation is job No. 1. We’ve got to get back to our target,” he told CNBC’s Steve Liesman during an interview. “If there’s going to be some cost to that, we’ve got to be willing to do that.”
Fed approved its 10th interest rate increase last week in a wildly expected decision, which takes the fed funds rate to a target range of 5%-5.25%.
Fed already expects a banking crisis to cause a recession this year, as per the minutes from the March meeting. Though Vice Chair for Supervision Michael Barr said the banking sector “is sound and resilient”, Fed's economists said the economy will take a hit.
“Given their assessment of the potential economic effects of the recent banking-sector developments, the staff’s projection at the time of the March meeting included a mild recession starting later this year, with a recovery over the subsequent two years,” the meeting summary said.
Fed Bostic, however doesn’t see cuts coming anytime soon even if the economy goes into recession. “What we’ve seen is that inflation has been persistently high, consumers have been really resilient in terms of their spending, and labour markets remain extremely tight. All of those suggests that there’s still going to be upward pressure on prices,” he said.
The consumer price index which was released last week, showed headline inflation numbers ay 4.0 per cent annual rate while core (excluding food and energy) was at 5.5 per cent.
Market pricing is indicating that the Fed is done hiking while on the other side, the inflation level is still running well ahead of Fed’s inflation target of 2 per cent. Markets are predicting a rate cuts before the end of the year following a sharp slowdown and a shallow recession, which could force the Fed to pivot.
Chicago’s Fed President Austan Goolsbee also spoke to CNBC, saying he is taking a more cautious approach to policymaking at a time of elevated uncertainty.
“When you have these big times of uncertainty, let’s be prudent and patient and watch a lot more data than we normally do,” Goolsbee said. “We’ve still got a few weeks before for the next meeting, but [we’re] watching the credit stresses, watching the craziness of the debt ceiling, and watching what’s happening in the labour market, and the prices.”
Also Read : Is recession coming? What 'FRED' chart on US corporate borrowing suggests
Also Read : US Fed hikes rates by 25 bps to fight inflation despite banking crisis and recession fears
Also Read : India's exports fall 13% to $34.66 billion in April: Govt data
In what could be a near-term death knell for stock markets, Atlanta Fed President Raphel Bostic said that he doesn’t foresee rate cuts in 2023 even if a recession hits. “If there’s going to be a bias to action, for me, would be a bias to increase a little further as opposed to cut,” he told CNBC while speaking at Atlanta Fed’s Financial Markets Conference.
“For me, inflation is job No. 1. We’ve got to get back to our target,” he told CNBC’s Steve Liesman during an interview. “If there’s going to be some cost to that, we’ve got to be willing to do that.”
Fed approved its 10th interest rate increase last week in a wildly expected decision, which takes the fed funds rate to a target range of 5%-5.25%.
Fed already expects a banking crisis to cause a recession this year, as per the minutes from the March meeting. Though Vice Chair for Supervision Michael Barr said the banking sector “is sound and resilient”, Fed's economists said the economy will take a hit.
“Given their assessment of the potential economic effects of the recent banking-sector developments, the staff’s projection at the time of the March meeting included a mild recession starting later this year, with a recovery over the subsequent two years,” the meeting summary said.
Fed Bostic, however doesn’t see cuts coming anytime soon even if the economy goes into recession. “What we’ve seen is that inflation has been persistently high, consumers have been really resilient in terms of their spending, and labour markets remain extremely tight. All of those suggests that there’s still going to be upward pressure on prices,” he said.
The consumer price index which was released last week, showed headline inflation numbers ay 4.0 per cent annual rate while core (excluding food and energy) was at 5.5 per cent.
Market pricing is indicating that the Fed is done hiking while on the other side, the inflation level is still running well ahead of Fed’s inflation target of 2 per cent. Markets are predicting a rate cuts before the end of the year following a sharp slowdown and a shallow recession, which could force the Fed to pivot.
Chicago’s Fed President Austan Goolsbee also spoke to CNBC, saying he is taking a more cautious approach to policymaking at a time of elevated uncertainty.
“When you have these big times of uncertainty, let’s be prudent and patient and watch a lot more data than we normally do,” Goolsbee said. “We’ve still got a few weeks before for the next meeting, but [we’re] watching the credit stresses, watching the craziness of the debt ceiling, and watching what’s happening in the labour market, and the prices.”
Also Read : Is recession coming? What 'FRED' chart on US corporate borrowing suggests
Also Read : US Fed hikes rates by 25 bps to fight inflation despite banking crisis and recession fears
Also Read : India's exports fall 13% to $34.66 billion in April: Govt data