By CultureBanx Team
- Raphael Bostic wants interest rates raised to a “neutral” level
- The current Fed rate sits in a range between 2% and 2.25%
As a member of the Federal Reserve’s policy making committee, Raphael Bostic continues to believe interest rates should be raised to a “neutral” level that neither stimulates nor hinders the economy. Many economists think the Federal Reserve will continue with its stated intention to hike interest rates again for the fourth time this year.
Why This Matters: In previous statements Bostic has commented that the Fed should hold off on a widely expected rate increase. Now, he’s signaling policy makers should indeed raise that nation’s benchmark interest rate. Currently rates sit in a range between 2% and 2.25% and policy makers estimate a neutral level to be anywhere from 2.5% to 3.5%.
The Fed’s gradual rate hikes have brought the benchmark interest rate to “within shouting distance” of neutral. While speaking at the University of Georgia Terry College of Business, Bostic noted the trajectory of capital spending makes him skeptical that this year’s 3% growth rate can be sustained.
Past periods of ultralow unemployment have been followed by recessions
With the unemployment rate at 3.7%, it’s below what most economists believe is sustainable. Bostic told the audience that past periods of ultralow unemployment have been followed by recessions. Ultimately, he wants the Fed to adopt a strategy that balances out super low rates while not running the risk of overheating by raising rates so much the economy tips into recession.
What’s Next: The Fed has one more policy meeting this year on December 18-19. Be sure to see if Bostic does indeed vote in favor of raising the Fed’s benchmark federal-funds rate.
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