Fed's Bostic: Ukraine war hasn't changed my thinking on balance sheet reduction, should still happen quickly
Atlanta Fed President and FOMC member Raphael Bostic said on Monday that the war in Ukraine had not changed his thinking on balance sheet reduction, which could happen quickly and faster than last time, reported Reuters. The Fed has not yet settled on the appropriate pace for the balance sheet runoff, he added, but he expects there to be a "symmetry of scale" relative to last time. Moreover, continued Bostic, balance sheet reductions will inform the appropriate pace of rate hikes.
On the economy, Bostic said that he sees inflation at 4.1% by the year's end and does not predict a recession, with GDP still expected to grow at a pace of 2.8% this year. Inflation will return back to 2.0% by 2024, he said, adding that he is comfortable with more aggressive rate hikes if the data says that's appropriate. My baseline, he noted, is that we won't need to take interest rates above neutral, but he is open to the idea if needed. Bostic said earlier in the day that his estimate for the neutral rate of interest is 2.25%.
Author
Joel Frank
Independent Analyst
Joel Frank is an economics graduate from the University of Birmingham and has worked as a full-time financial market analyst since 2018, specialising in the coverage of how developments in the global economy impact financial asset
