The Federal Reserve could opt to raise its benchmark rate by 50 basis points if a more aggressive approach to taming inflation is needed, Raphael Bostic, president of the Fed’s Atlanta branch, told the Financial Times in an interview.
Bostic stuck to his prediction that three quarter-point increases starting in March is the most likely scenario, though stubbornly high consumer prices may justify a more robust rate rise. The Fed typically increases rates in quarter-point increments.
“Every option is on the table for every meeting,” Bostic said on Friday. “If the data say that things have evolved in a way that a 50-basis-point move is required or be appropriate, then I’m going to lean into that. . . . If moving in successive meetings makes sense, I’ll be comfortable with that,” he told the newspaper.
Bostic said he would be looking for whether higher wages are meaningfully boosting prices, though he expects wage growth to moderate in the coming months, according to the FT.
Bostic is not a voting member of the policy-setting Federal Open Market Committee in 2022.
Fed Chairman Jerome Powell told reporters last week that officials were ready to raise rates in March, and he left the door open to moving at every meeting in 2022 if needed to curb the fastest U.S. inflation in a generation.
Most economists forecast the Fed will make a quarter-point move in March, though Nomura Holdings Inc. expects a 50 basis-point increase, citing Powell’s comments.
The FOMC last raised rates by a half-point in May 2000.
“The bar is very high for doing 50 basis points in March, as the Fed tends to be more careful at the beginning of a hike cycle,” said Stephen Stanley, chief economist at Amherst Pierpont Securities.
Bloomberg Economics said Friday’s Employment Cost Index report, a gauge that Powell said almost made him want to speed up the taper pace last fall, had increased the chance of a larger move.
Billionaire investor Bill Ackman has already called for a 50 basis point increase in March as a way to bolster the Fed’s “perceived credibility as an inflation fighter” — what’s been dubbed the “shock and awe” approach.
A larger initial move “would have the reflexive effect of reducing inflation expectations, which would moderate the need for more aggressive and economically painful steps in the future,” Ackman wrote Jan. 15 in a series of tweets.
