20 Apr Fed’s Bostic Cautious About Rate Hikes as President Biden Blames Higher Prices on Covid-19 and Putin
As inflation continues to wreak havoc on the lives of ordinary American citizens, all eyes are focused on the U.S. Federal Reserve’s plans to fix the situation. Meanwhile, as the St. Louis Fed president James Bullard wants to aggressively hike the benchmark bank interest rate, Atlanta Fed president Raphael Bostic thinks the central bank needs to use caution.
Atlanta Fed President Raphael Bostic: ‘The Fed Needs to Be Cautious as We Move Forward’
The U.S. economy looks bleak after two years of abnormal inefficiencies that have plagued the citizenry’s wealth. Blame has been placed on the erratic spending decisions of public policymakers, the Federal Reserve’s massive monetary expansion over the last two years, the supply chain shock from aggressive Covid-19 lockdown procedures, and the tightest sanctioned economy in decades stemming from the current Ukraine-Russia conflict. All of these factors have led to the fastest rising inflation rate the U.S. has seen in over 40 years.
On Monday, the president of the Federal Reserve Bank of St. Louis, James Bullard, explained that the Fed could get the benchmark bank interest rate up to 3.5% by the year’s end. Bullard mentioned an aggressive rate hike that could see the rate increase by 75 basis points like Fed chair Alan Greenspan did in 1994.
Despite Bullard’s intentions, a report written by Wall Street Journal authors Jon Hilsenrath and Nick Timiraos published on Monday says that “the Fed has never successfully fixed a problem like this.” Hilsenrath’s and Timiraos’s report further notes that “many factors are out of [the Fed’s] control” and “they are strikingly behind.”
While Bullard wants to raise rates drastically, Atlanta Fed president Raphael Bostic has expressed caution about aggressively hiking the benchmark bank interest rate. Speaking with CNBC’s Sara Eisen on Tuesday, Bostic said that he believes staying neutral is also a top priority.
“I think I’m in the same areas as my colleagues philosophically,” Bostic elaborated. “I think it’s really important that we get to neutral and do that in an expeditious way.” However, Bostic’s envisioned neutral benchmark rate is a lot different than Bullard’s 3.5% by Q4 2022. While it could be 2-2.5%, the Atlanta Fed president said he could also see the rate as low as 1.75%.
“I really have us looking at one and three-quarters by the end of the year, but it could be slower depending on how the economy evolves and we do see greater weakening than I’m seeing in my baseline model,” Bostic remarked during the interview. “This is one reason why I’m reluctant to really declare that we want to go a long way beyond our neutral place, because that may be more hikes than are warranted given sort of the economic environment.”
The Atlanta Fed president 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 are skeptical that the U.S. central bank will be able to fix the economy’s ongoing issues. Many blame the Fed’s monetary and asset expansion and the massive stimulus bills forwarded by former president Donald Trump and the current U.S. president Joe Biden.
However, Biden is blaming the poor economy on Covid-19 and Russia’s Vladimir Putin. “I know that families are still struggling with higher 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: COVID and Vladimir Putin,” the president added.
Biden’s statements got a lot of flack on Wednesday as fingers were pointed directly at the Fed’s money printing. “Sure it has absolutely nothing with the Federal reserve’s ‘money printer go brrrr for Wall Street,’” one individual said in response to Biden’s tweet. “Not all of us have dementia Joe, some of us are still cognizant and can see you and your administration are full of sh**,” the person added. Another individual replied to Biden and wrote:
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.
What do you think about Atlanta Fed president Raphael Bostic saying the Fed should be cautious when it comes to interest rate hikes? What do you think about Biden blaming the U.S. economy’s flaws on Covid-19 and Putin? Let us know what you think about this subject in the comments section below.
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