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Atlanta Fed President Raphael Bostic: ‘The Fed Needs to Be Cautious as We Move Forward’
After two years of abnormal inefficiencies that have harmed the nation's wealth, the outlook for the United States economy is dismal. The erratic spending decisions of public policymakers, the Federal Reserve's massive monetary expansion over the last two years, the supply chain shock caused by aggressive Covid-19 lockdown procedures, and the tightest sanctioned economy in decades as a result of the current Ukraine-Russia conflict have all been blamed. All of these variables have combined to produce the fastest-rising inflation rate the United States has witnessed in more than four decades.
On Monday, James Bullard, the president of the Federal Reserve Bank of St. Louis, stated that the Fed could raise the benchmark bank interest rate to 3.5 percent by the end of the year if the current trend continues. According to Bullard, a rate hike that is aggressive in nature might see the rate climb by 75 basis points, similar to what former Fed head Alan Greenspan did in 1994.
Bullard's motives are well-intentioned, but a report written by Wall Street Journal authors Jon Hilsenrath and Nick Timiraos and released on Monday claims that "the Fed has never successfully solved an issue of this magnitude." Hilsenrath and Timiraos' study goes on to say that "many things are beyond [the Fed's] control" and that "they are well behind." They also say that
While Bullard wants to raise rates dramatically, Atlanta Fed president Raphael Bostic has expressed reservations about raising the benchmark bank interest rate in such a substantial manner. According to Bostic, who spoke with CNBC's Sara Eisen on Tuesday, remaining neutral is also a significant goal for him.
"I believe I am conceptually on the same page as my colleagues," Bostic explained. "I believe it is critical that we get neutral quickly and that we do so in a safe and secure manner." However, Bostic's envisioned neutral benchmark rate is significantly lower than Bullard's 3.5 percent by the fourth quarter of 2022. While the rate might be as high as 2-2.5 percent, the head of the Atlanta Federal Reserve stated it could be as low as 1.75 percent.
When asked about the timing of his forecast, Bostic said, "I truly think we'll be looking at one and three-quarters percent by the end of the year, but it might be slower depending on how the economy unfolds and we do see greater weakening than I'm seeing in my baseline model." It's for this reason, among others, that I'm hesitant to declare that we intend to go a long way beyond our neutral point, because it could result in higher hikes than are appropriate in light of the current economic climate.
The president of the Atlanta Federal Reserve added:
[The Fed] needs to be cautious as we move forward. We do need to get away from zero, I think zero is lower than we should be right now. But at the same time, we need to just pay attention.
US President Joe Biden Blames High Prices on Covid-19 Pandemic and Russia’s Vladimir Putin
Of course, many people are pessimistic that the Federal Reserve will be able to resolve the persisting problems in the economy. Many point to the Federal Reserve's monetary and asset expansion, as well as the enormous stimulus programs proposed by former President Donald Trump and current Vice President Joe Biden, as the causes of the present economic downturn.
Biden, on the other hand, is blaming the weak economy on Covid-19 and Russian President Vladimir Putin. "I am aware that households are still hurting as a result of rising prices. The vice president remarked on Twitter on April 20: "I grew up in a home where if the price of gasoline went up, we felt it." In addition, the president stated, "Let's be completely clear about why prices are so high right now: COVID and Vladimir Putin."
Biden's words drew a lot of criticism on Wednesday, with many pointing the focus straight at the Federal Reserve's money printing. After Biden's tweet went viral, some people expressed their displeasure with it by saying, "Sure it has absolutely nothing to do with the Federal Reserve's'money printer go brrrr for Wall Street." There are some people who are still cognizant and who can see that you and your administration are a load of sh**, according to the person who spoke with me. Another individual responded to Biden with the following message:
Actually POTUS, it was because YOUR Federal reserve printed too much money during Covid. Don’t make Putin a scapegoat for your mismanagement of the economy.
