Federal Reserve Bank of Atlanta President Raphael Bostic acknowledged banking sector woes made the central bank’s interest rate hike call this week challenging, but he said the Fed’s main job must remain focused on getting inflation lower.
Speaking in an interview Friday with National Public Radio, Bostic said “there was a lot of debate but this wasn’t a straightforward decision” to raise rates this week even as the banking sector is under stress. But, “we have to get inflation under control and back to our target,” Bostic said. On Wednesday, the central bank’s rate-setting Federal Open Market Committee boosted its short-term rate target by a quarter percentage point and signalled the possible end of a tightening cycle that began a year ago. The Fed acknowledged that banking sector stress was likely to weigh on the economy.
As Fed officials got ready to meet, some economists said the Fed should stand aside on rate rises while it takes stock of how banking problems might affect the economy. Just days before the FOMC gathering, two banks foundered, rattling markets and forcing government authorities to take steps to ensure banks had enough liquidity to navigate the turbulence.
“I’m very comfortable with the idea that we didn’t see over the weekend before that meeting things getting worse, and that made me comfortable that we can manage through this,” Bostic said on the radio program.
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