Atlanta Federal Reserve Chairman Raphael Bostic said Monday he is not worried about the U.S. economy overheating, though he believes growth could happen faster than many expect.
In an estimate well ahead of most of his colleagues, Bostic, a voting member of the Federal Open Market Committee, drew attention recently to say he believes the Fed may have to raise the interest rates as early as mid-2022.
He based it on his forecast that the economy could recover quickly from the Coivd-19 recession once vaccinations spread further and the stimulus to pump began to reach more people in need.
Most Fed officials, while forecasting strong growth later this year, do not see the rate hikes coming until 2023.
“This recession is unlike any other we’ve had before, so the recovery will be like that too,” Bostic told CNBC’s “Closing Bell”. “I think there’s a couple of things here. When we talk about 2023 and 2024, that’s out there and there will be a lot of things going on that could go one way or another.”
“Many of the latest developments have been positive,” he added. “We should be open to the possibility that things could happen more strongly than they would otherwise.”
To date, Congress has allocated about $ 5 trillion in relief expenses to the economy and the Fed has contributed with near-zero short-term debt rates and more than $ 3 trillion in liquidity through the its large-scale asset purchase program, also known as quantitative easing.
Some market participants have recently wondered when the Fed could start withdrawing from the policy adjustment now that vaccines have begun, there is likely to be more fiscal stimulus and signs of inflation slowly starting to rise.
While he sees rate hikes perhaps a year and a half away, Bostic added that he believes the economy still needs a lot of help now.
“The main goal of this is to keep people as complete as possible,” Bostic said. “We know that when you lose so many jobs, there will be holes to fill.”
The Fed has pledged to keep rates low and liquidity pumping, even if inflation modestly exceeds the central bank’s 2% target. Bostic said he believes it is important given the Fed’s focus on an “inclusive” employment mandate that seeks to make the gains as broad as possible among racial and income groups.
Although the Fed has said it will tolerate higher inflation, Bostic said it still sees no worrying signs about price pressure.
“It’s not the level of inflation, but much more the trajectory as we move forward, that I will focus on to get answers on whether the economy can move to places that make me uncomfortable,” he said.
Bostic also said he has been observing price fluctuations recently in the stock market for companies like GameStop and others, but said he believes this is more of a regulatory issue and does not concern monetary policy.