Fed’s Bostic: Full impact of policy on inflation won’t be seen for months

On Tuesday, Atlanta Federal Reserve President Raphael Bostic said that he wasn’t expecting to see the full impact of monetary policy on inflation for months. US Dollar Index showed no immediate reaction to these comments and was last seen losing 0.6% on the day at 106.30.

On Tuesday also, A key measure of inflation, wholesale prices, rose by 8% in October from a year before, according to the latest report from the Bureau of Labor Statistics.

The number is significantly better than forecasts. Economists expected the Producer Price Index, which measures prices paid for goods and services before they reach consumers, to show an annual increase of 8.3%, down from September’s revised 8.4%.

On a monthly basis, producer prices rose 0.2%, below expectations and even with the revised 0.2% increase seen in September.

Year-over-year, core PPI — which excludes food and energy, components whose pricing is more prone to market volatility — measured 6.7%, down from September’s revised annual increase of 7.1%.

Key Quotes

“Fed must look to economic signals other than inflation as policy guideposts.”

“Seen clues that tighter financial conditions may be pinching commercial real estate, banking.”

“Tighter financial conditions have not yet constrained business activity enough to seriously dent inflation.”

“Anticipating that more interest rate hikes will be needed.”

“Indicators of broad-based easing of inflation need to be seen.”

“There are glimmers of hope in goods inflation, need to see services inflation slow as well.”

“Labor market remains tight, seeing upward pressure on wages.”

“Fed’s number one job is to tame unacceptably high inflation.”

“Fed’s policy actions risk inducing a recession but that is preferable to high inflation getting entrenched.”

“Recession is not a foregone conclusion, Fed will try to avoid one if possible.”

“There are many scenarios in which a recession could turn out to be mild.”

“Once Fed reaches appropriately restrictive policy, it needs to stay there until there is convincing evidence inflation is firmly on track to 2% target.”