Fed’s Bostic Says Half-Point Move Possible If Inflation Persists

(Bloomberg) -- Federal Reserve Bank of Atlanta President Raphael Bostic said he favors raising interest rates by 25 basis points at the Federal Open Market Committee's March meeting and would consider a larger half-point move if monthly inflation readings fail to decline from elevated levels.

“I am still in favor of a 25 basis-point move at the March meeting,” Bostic said Monday in a virtual discussion with Harvard University students.

“One data point that I am looking at in particular is month-to-month change in inflation. To the extent we start to see that trend down, then I will be comfortable pretty much with a 25 basis-point move. If that continues to persist at elevated levels, or even moves in the other direction, then I am really going to have to look at a 50-basis-point move for March.”

February consumer price data will be released March 10, five days before the FOMC begins its two-day policy meeting. Economists surveyed by Bloomberg News expect the consumer price index to rise 0.7% from the previous month and 7.8% year-over-year.

Fed officials in the past week stuck to their resolve to raise interest rates next month despite uncertainty posed by Russia's invasion of Ukraine, with Governor Christopher Waller discussing the possibility of a half-point move.

While acknowledging the risks created by the conflict, which has triggered one of the worst security crises in Europe since World War II and caused oil prices to jump, the central bankers stressed the need to confront the hottest U.S. inflation in 40 years.

Bostic, who does not vote on monetary policy this year, said he wanted to be sure that no one would be surprised by the possibility of a larger move.

“Historically, over the last 10 years or so our moves have been in 25 basis point increments,” he said. “I was hearing and getting a sense that many expected that was the only type of move we could do. I actually think that is wrong. We need to make sure people have different levels of move in mind, and awareness of those are possibilities.”

Bostic added each of the seven FOMC meetings this year will be important for a possible move.

“Every meeting is live for us,” he said. “ As data comes in, we will have to make judgments about what happens at every stage of the way.”