Atlanta Fed President Raphael Bostic said Tuesday that the central bank did not overdo its money printing during the depths of the pandemic, expressing confidence that the Fed can get high inflation under control.
“I actually don't think that the Fed overdid it,” Bostic told Yahoo Finance in an interview on the sidelines of a conference in Amelia Island, Florida.
When COVID-related shutdowns thrust the U.S. economy into a recession in 2020, the Fed moved quickly to slash borrowing costs to near-zero and restarted its Great Financial Crisis-era policy of snatching up trillions of assets in the open market to signal its support to the economy.
But prices are now rising at yearly paces unseen since the early 1980s, spurring the Fed into a rapid pivot to undo its pandemic-era stimulus. That has involved raising short-term interest rates and moving to shrink its asset holdings.
In March, the Fed lifted rates by 0.25% and the central bank moved last week to further lift rates by another 0.50% (to a current target range between 0.75% and 1.00%).
Bostic told Yahoo Finance Tuesday that he currently sees the case for further 0.50% moves in the next two to three meetings (the Fed makes policy decisions roughly every six weeks).
“Let's just keep this moving and make sure that we're doing all we can to get inflation under control,” Bostic said.
Could have been 'much more painful'
Bostic said there may be pain associated with tighter Fed policy. For example, higher borrowing costs could push businesses to contract their hiring efforts, which Bostic said will likely lead to higher unemployment.
But the Atlanta Fed chief said he has no regrets about the scale of Fed policies through the pandemic.
“I think if I was going to want to do too much or too little, I'd rather deal with an economy that had strong fundamentals and foundation,” Bostic said. He added that the alternative would have been more small business bankruptcies and more “precarious” household finances.
“And that is actually a much more painful environment to be in,” Bostic added.
Fed balance sheet
On the Fed balance sheet, Bostic said he was “pleased” to see his central bank colleagues coalesce around a plan last week to allow U.S. Treasuries and agency mortgage-backed securities roll off of its nearly $9 trillion balance sheet. The strategy will shed up to $95 billion in assets each month by September this year, but Bostic said he could see a situation where the Fed may want to speed up that process by actively selling more MBS.
Cleveland Fed President Loretta Mester told Yahoo Finance at the same event that she similarly could see the Fed having a conversation about a more aggressive balance sheet drawdown program.
The next Fed decision is scheduled for June 15.
Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.
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