The Fed’s Bostic is weighing Omicron variant and two rate hikes

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As new COVID-19 variant meets Bags of the world, Federal Reserve President Rapheal Bostic gave his assessment of how this could affect the economy.

In an interview with FOX, the Atlanta Fed President said, “With each additional variant introduced, the economy has slowed, but the extent of the slowdown has been less.” If the Omicron variant follows a similar trajectory as the Delta variant, we will see a slowdown, but not as much as during the Delta variant.

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Bostic is a voting member of the Federal Reserve Open Markets Committee next year. This is the committee that sets monetary policy. He says the Fed could potentially hike rates twice in 2022 to cope with inflation. The latest consumer price inflation data shows that prices have increased 6.2% in the past 12 months, the highest increase in 31 years.

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Raphael Bostic, President and Chief Executive Officer of the Federal Reserve Bank of Atlanta, speaks to members of the Harvard Business School Club of Atlanta on Wednesday, February 19, 2020 at the Buckhead Club in Atlanta, Georgia, United States. Bostic said he did (Getty Images)

Adds Bostic, “If the economy continues to run hotter than we expected in terms of rising inflation, a second might be needed and our move may need to be faster,” he said.

Bostic noted that policymakers will follow the data when it comes to rate changes and says markets may need to prepare for a nimble timeline for the cut.

“For me the early second quarter, the end of the first quarter of 2022, are all at stake as sensible alternatives if we could stop our buying,” explained Bostic, because it gives the Fed options if inflation rises significantly from then on.

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Bostic went on to say that COVID is driving inflation through supply chain disruptions and backlog. He’s heard of companies in his district and they don’t see inflation receding until well into 2022. “They say, well, it looks more like mid-2020, maybe even after the third or fourth quarter, not for sure.”

Bostic expects fourth quarter GDP growth to be stronger than the third quarter, which was 2.1% in the second estimate, as reported last week.

As for the holiday sales, Bostic is overseeing the year-end transition.


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