As inflation continues to wreak havoc in the lives of ordinary American citizens, all eyes are on the U.S. Federal Reserve’s plans to remedy the situation. While St. Louis Fed President James Bullard wants to aggressively raise the benchmark bank interest rate, Atlanta Fed President Rafael Bostic believes the central bank needs to be cautious.
Atlanta Fed President Rafael Bostic: “The Fed needs to be cautious as it moves forward”
The U.S. economy looks bleak after two years of abnormal inefficiency that has blighted citizens’ wealth. The culprits are unsustainable spending decisions by government policymakers, the Federal Reserve’s massive monetary expansion over the past two years, the supply chain shock from aggressive Covid-19 lockout procedures, and the toughest sanctions in decades triggered by the Ukraine-Russia conflict. All of these factors led to the fastest increase in U.S. inflation in 40 years.
On Monday, St. Louis Federal Reserve Bank President James Bullard explained that the Fed could raise the benchmark bank interest rate to 3.5% by the end of the year. Bullard referred to an aggressive rate hike that could result in a 75 basis point rate hike, as Fed Chairman Alan Greenspan did in 1994.
Despite Bullard’s intentions, a report by Wall Street Journal authors John Hilsenrath and Nick Timiraos, published Monday, stated that “the Fed has never successfully addressed such a problem.” The Hilsenrath and Timiraos report goes on to note that “many factors are beyond [the Fed’s] control” and “they are staggeringly behind.”
While Bullard wants to raise rates sharply, Atlanta Fed President Rafael Bostic has expressed caution about aggressively raising the benchmark bank interest rate. Speaking with CNBC’s Sarah Eisen on Tuesday, Bostic saidthat he believed that maintaining a neutral stance was also a top priority.
“I think philosophically I’m in the same areas as my colleagues,” Bostic clarified. “I think it’s very important that we take a neutral stance and do it as soon as possible.” However, the neutral prime rate Bostic envisions is significantly different from the 3.5 percent Bullard rate by Q4 2022. While it could be 2-2.5%, the Atlanta Fed president said he could also see the rate at 1.75%.
“I do believe we will be looking at 1 and 3 quarters by the end of the year, but it could be slower, depending on how the economy develops, and we will see more easing than I see in my baseline model,” Bostick said during the interview. “That’s one of the reasons why I don’t want to state that we want to go far beyond our neutral position, because that could mean more hikes than are warranted given economic conditions.”
The Atlanta Fed President added:
[The Fed] needs to be careful as we move forward. We do need to move away from zero, I think zero is lower than we should be right now. But at the same time, we just need to be careful.
US President Joe Biden blames high prices on the Covid-19 pandemic and Vladimir Putin in Russia
Of course, many are skeptical that the US central bank can solve the economy’s current problems. Many blame the Fed for the expansion of the money supply and assets, as well as the massive stimulus bills put forth by former President Donald Trump and current U.S. President Joe Biden.
However, Biden blames Covid-19 and Russian President Vladimir Putin for the bad economy. “I know that families are still struggling with rising prices. I grew up in a family where if the price of gas went up, we felt it,” Biden said on Twitter on April 20. “Let’s be absolutely clear about why prices are high right now: COWID and Vladimir Putin,” the president added.
Biden’s statements drew much criticism Wednesday as fingers were pointed directly at the Fed’s money printing “Of course, this has absolutely nothing to do with the Federal Reserve’s ‘money printer’ printing money for Wall Street,” one person said in response to Biden’s tweet. “Not all of us are weak-minded, Joe, some of us are still conscious and can see that you and your administration are full of shit,” the interlocutor added.Another person responded to Biden and wrote:
In fact, 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.”
What do you think about Atlanta Fed President Rafael Bostic saying that the Fed should be careful about raising interest rates. What do you think about Biden blaming the U.S.A. for the economy on Covid-19 and Putin. Let us know what you think about it in the comments section below.
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