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Fed’s Bostic sees six rate hikes this year and war risks

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By Ann Sapphire

March 21 (Reuters) – Federal Reserve Bank of Atlanta President Raphael Bostic said on Monday he sees a total of six interest rate hikes this year and two by 2023 in the United States, fewer than most. other central bank officials, as they are concerned about the effects of the Russian invasion of Ukraine on the economy.

“My main concern in 2022 is to control high rates of inflation,” Bostic said in remarks prepared for delivery to the National Association for Business Economics, also noting that it is critical to address the significant gap between labor supply and demand.

However, he added, “heightened levels of uncertainty got ahead of my mind and have dimmed my confidence that an extremely aggressive rate path is appropriate today.”

The Fed last week raised rates for the first time since 2018, raising them from near zero in a bid to tame inflation currently hovering above 6%, three times the central bank’s target.

Most Fed policymakers believe rates will rise to at least 1.9% by the end of the year – a pace equivalent to a quarter-point hike at each of the Fed’s remaining six meetings this year. year – and four more are expected next year.

Bostic confirms that the labor market is tight and it is “critical” to restore the balance between labor supply and demand. In addition, he pointed out that the conflict in Ukraine will put further upward pressure on prices of raw materials such as crude oil and wheat, but also more broadly, as companies will have to readjust their supply chains.

Both conditions are likely to exacerbate already intense inflationary pressure, although on the other hand risks “go both ways” as conflict-fueled uncertainty is likely to dampen economic activity, it said.

“If demand falters in the face of economic uncertainty or the withdrawal of accommodative monetary policy, the appropriate path may be shallower than I currently anticipate,” Bostic said. “But there are other developments, such as changes in supply strategies, that could mean expecting higher costs and thus prompt a more pronounced policy transmission than is.”

(Edited in Spanish by Carlos Serrano)

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