On Tuesday, Atlanta Federal Reserve President Raphael Bostic said he sees little evidence inflation is responding to the actions of the Federal Reserve thus far, and he believes borrowing costs will have to rise before inflation will show clear and convincing evidence of retreating.

In an essay posted to the Atlanta Fed’s website, Bostic said, “Tighter money has not yet constrained business activity enough to seriously dent inflation. I anticipate that more rate hikes will be needed,” before the Fed’s policy is restrictive enough to bring inflation in line with the Fed’s 2% target rate.

Bostic skirted any specifics, such as if he favored slowing the pace of rate increases, or just how high he felt the benchmark interest rate need to rise to in order to begin to push inflation down toward the target rate. Currently the benchmark rate sits at 3.75%-4.00%.

Bostic said he felt a recession could be avoided, however he said if it were necessary, a recession “would be preferred to the alternative,” which would be seeing inflation become entrenched in the economy.

He noted there were “glimmers of hope,” such as a slowing pace of price increases, however he added, “we will need to see increases in services prices slow, too. So far we haven’t.”

He also noted the continually tight labor market was continuing to keep upward pressure on wages.

He noted, “Right now, job number one for the FOMC is to tame inflation that is unacceptably high,” noting the Federal Open Market Committee meetings of the Fed must bring inflation back in line with the 2% target rate. Presently inflation sits at over three times the Fed’s target.

Once Fed policy is sufficiently restrictive, Bostic said it will need to remain so, “until we see convincing evidence that inflation is firmly on track” to 2%.

Photo of Atlanta Fed Headquarters courtesy of Wikipedia