Based on the Fed's Bostic, the financial system might recuperate quicker than anticipated
Raphael Bostic, president of the US Federal Reserve in Atlanta, said Monday he wasn't worried about the US economy overheating, despite believing that growth could come faster than many expect.
In an estimate that was way ahead of most of his peers, Bostic, a voting member of the Federal Open Market Committee, recently pointed out that he believed the Fed might need to raise rates as early as mid-2022.
He justified this with his expectation that the economy could quickly recover from the Coivd-19 recession once vaccinations continue to spread and the impulse that is being pumped out goes to more people in need.
Most Fed officials expect strong growth later this year but don't see rate hikes until 2023.
"This recession was unlike anything we've ever had before, so the recovery will be like that," Bostic told CNBC's Closing Bell. "I think there are a couple of things here. When we talk about 2023, 2024, that's way out there and a lot is going to happen that could go one way or the other."
"Many of the recent developments have been positive," he added. "We should be open to the possibility that things will happen more than usual."
So far, Congress has allocated around $ 5 trillion in aid spending to the economy, and the Fed has provided near-zero short-term lending rates and more than $ 3 trillion in quantitative liquidity through its extensive asset purchase program, also known as Loosening.
Some market participants have recently wondered when the Fed might begin to pull back on policy after the vaccines launch. More fiscal stimulus is likely on the way, and signs of inflation are slowly mounting.
Despite seeing rate hikes in about a year and a half, Bostic added that he felt the economy still needs a lot of help now.
"The main goal is to keep people as complete as possible," said Bostic. "We know when you lose so many jobs there will be gaps to fill."
The Fed has pledged to keep interest rates low and increase liquidity, even if inflation slightly exceeds the central bank's 2% target. Bostic said he thinks this is important considering the Fed is focused on an "inclusive" employment mandate that aims to make profits as broad as possible across races and income groups.
While the Fed has announced that it will tolerate higher inflation, Bostic does not see any worrying signs of price pressure.
"It's not actually the level of inflation, but rather the trend that I'll be focusing on for answers on whether the economy is moving into places that I'm uncomfortable with," he said.
Bostic also said he had recently seen price fluctuations in the stock market for companies like GameStop and others, but he thinks this is more of a regulatory issue than a monetary policy issue.