Avoiding Unintentionally Crimping the U.S. Economy

By CultureBanx Team

  • Atlanta Fed President Raphael Bostic warns against inadvertently crimping the U.S. economy

  • In 2018, the Fed raised interest rates 4 times

The demand for reserves at the central bank has Atlanta Fed President Raphael Bostic sounding the alarm against unintentionally crimping the U.S. economy. Some of the uncertainty is due to the uneasy outlook in regards to U.S. trade tensions with China.

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Why This Matters: Bostic along with his fellow policy makers are prudently looking at the Fed’s balance sheet, a number that stood at $4.5 trillion during the financial crisis interventions, and has since come down to $4 trillion. The FOMC members will determine just how much lower they should allow the central banks account to decline.

“It is important that we do not go too fast and act in a non-prudent way that winds up inadvertently restricting the economy,” Bostic said at the European Financial Forum.

It is important that we do not go too fast and act in a non-prudent way that winds up inadvertently restricting the economy

During 2018 the Fed raised interest rates four times and there’s been a noticeable change in businesses mood in the past year. It’s important to note that higher yields raise borrowing costs for corporations, they also divert investment away from stocks. The Financial Times reported executives digested hazards including trade tensions and slowing growth in Europe and China as major concerns.

Situational Awareness: Raphael Bostic is the first black president to lead any of the 12 Federal Reserve regional banks, and just the fourth to serve on its policy-making committee. 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.

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