The Federal Reserve's strategy to achieve a 2% inflation rate is seen as challenging yet sustainable, as both economic growth and the labor market show signs of cooling, stated Raphael Bostic, President of the Federal Reserve Bank of Atlanta, on Monday. Recent figures indicate that inflation, as measured by personal consumption expenditures, has only slightly declined over the past six months.
"But not in a rapid, straight-line fashion," Bostic explained in an essay shared on the Fed branch's website. Core inflation, which excludes the often volatile food and energy prices, has remained stubbornly high, fluctuating around the 2.6% to 2.7% range. While there are certain upward risks to maintaining price stability, especially with the persistently high shelter costs, Bostic remarked that he does not interpret the current fluctuations as indicative of a complete stall in progress towards achieving consistent price stability. When isolating housing costs, the core inflation rate, according to the consumer price index, was observed to have increased at an annual rate of 2.3% in October.
In contrast, the rate including shelter was higher at 3.3%. Bostic, a voting member of the Federal Open Market Committee for this year, commented that he remains "not alarmed by the relative strength of shelter prices," anticipating that a slowdown in rental growth could ultimately help lower inflation. Bostic emphasized that there are no signs suggesting an imminent surge in economic vigor.
"Indeed, economic growth has exceeded expectations in recent quarters. However, the data we gather and our contacts indicate that economic growth, mirroring conditions in the labor market, is easing, a trend I expect to continue," he stated. He further indicated that despite the conclusion of a tense presidential election cycle, geopolitical uncertainties both domestically and globally continue to pose potential risks for renewed inflationary pressures.
"Given the many twists and turns we've experienced in recent years, we must remain vigilant to any surprises that may arise," he cautioned. Nevertheless, Bostic's fundamental belief is that the Federal Reserve is progressing towards its 2% inflation target, affirming his commitment to do everything necessary to achieve this goal.
"The path ahead for monetary policy is not preset," he noted. "In determining the optimal direction for this path, I will rely on incoming data, insights from our survey portfolio, the balance of risks, and feedback from our business contacts. We have significant work ahead of us. We are prepared for the challenges that lie ahead.".