Due to the US economy’s momentum, it should prove possible to tame inflation without incurring significant job losses, according to President of the Atlanta Federal Reserve Raphael Bostic.
In an interview with CBS’ face the nation, Bostic said, “If you look over history … there is a really good chance that if we have job losses it will be smaller” than in previous slowdowns.
While noting, “Inflation is high. It is too high. And we need to do all we can to make it come down,” Bostic noted that it is debatable just how big of a slowdown is needed, and how enduring it will need to be, as well as how many jobs will need to be lost in that process, before demand for goods is brought back into line with supply, and and inflation begins to cool.
Bostic added that given that payroll jobs are continuing to grow strongly, there is “a lot of positive momentum. … There is some ability for the economy to absorb our actions and slow in a relatively orderly way.”
Striking a more reassuring tone than Fed Chair Powell has, Bostic added, “We need to have a slowdown. … We are going to do all that we can at the Federal Reserve to avoid deep, deep pain.”
Bostic’s comments came after a rough week for the market which left investors reeling, and saw a return to bear territory for the Dow.
The selloffs came on the heels of the Fed’s announcement of a third consecutive 75 basis point interest rate hike, as well as comments indicating investors should expect a continued strong policy position from the central bank into next year.
Immediately on the heels of that, other central banks followed suit overseas, raising their rates, highlighting the risk of a global economic slowdown triggered by central banks tightening monetary supplies to combat inflation.
In Japan, a rising dollar further battered the yen, causing Japan to intervene for the first time in almost 25 years to strengthen their currency.
In the UK uncertainty reigned, as the central bank sought to tighten monetary policy, only to have the government proposing tax breaks that would counter that policy. The pound dropped 3.5%, to its lowest level against the dollar since 1985.
As these concerns grew, Fed Chair Jerome Powell stated the central bank’s main focus would be on inflation, and it would require significant evidence of the price increases slowing down “over coming months” before the bank would consider shifting to a less stringent policy position.
