Fed’s Bostic: Larger 75 bps hike “not on the radar”

Atlanta Fed President and FOMC member Raphael Bostic on Tuesday reiterated the important of getting rates to neutral territory “expeditiously”, though cautioned that a 75 bps rate hike is “not on the radar”.

Bostic said he estimates the neutral rate to be around 2.5% and feels the US economy is strong enough to stand on its own.

Some improvements on inflation will come from non-monetary developments, he noted. However, Bostic cautioned that cuts to global growth forecasts (a reference to Tuesday’s IMF World Economic Outlook release) are a sign that the Fed needs to be cautious and is a reason not to rush beyond neutral regarding rate hikes.

Additional Takeaways:
Bostic estimates GDP growth of around 3% for the US economy this year and said “there is momentum” to avoid recession.

There are some signs that inflation has “capped off” though fertilizer and other input costs may continue adding pressure.

As long as markets continue to function well, the Fed should continue to reduce its balance sheet.