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Wednesday, November 30, 2022

Atlanta Fed president: Soft landing from high inflation is not going to be easy

Raphael Bostic, the president of the Federal Reserve Bank of Atlanta, said on Sunday it’s “not going to be easy” to achieve a slowdown in demand without causing a recession, a feat known as a soft landing.

Speaking with Margaret Brennan on CBS’s “Face the Nation,” Bostic declined to provide specific odds of achieving a soft landing as the Federal Reserve continues rapidly hiking interest rates, aiming to reduce inflation by lowering demand through more expensive borrowing costs.

“This is something that is going to be hard. It’s not going to be easy,” Bostic said.

“There will likely be some job losses,” he continued. “But I think if you look over the historical history here and our economic experiences, there’s a really good chance that if we have job losses, it’s going to be smaller than what we’ve seen in other situations, and that’s what I’m banking on.”

The Federal Reserve last week announced it would increase its baseline interest rate by 0.75 percentage points, the fifth rate hike this year and third consecutive 75-basis-point hike.

The hikes are aimed at slowing the economy to reduce inflation, which recently hit 40-year highs and clocked in at 8.3 percent in August.

But the increased borrowing costs also make it more difficult for individuals to take on debt and businesses to expand, which can lead to slowing job growth and layoffs.

The central bank has set an annual inflation target of 2 percent, a figure Bostic reaffirmed on Sunday even after markets tumbled last week over fears inflation-fighting measures could induce a recession.

Brennan also pressed Bostic on two back-to-back quarters of negative gross domestic product (GDP) growth this year. GDP measures the total value of goods and services produced nationwide. 

Such a decline is commonly described as a recession; however, Bostic on Sunday pushed back on the notion that GDP is the sole measure of a recession.

“I think that the GDP number is one way to think about the economic performance, but many others would suggest that the economy has a lot of positive momentum,” he said on CBS. 

“We’re still creating lots of jobs on a monthly basis, and so I actually think that there is some ability for the economy to absorb our actions and slow in a relatively orderly way,” he continued. “But we need to have slowdown. There’s no question about that. But I do think that we’re going to do all that we can at the Federal Reserve to avoid deep, deep pain.”

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