Raphael Bostic Says Fed Needs to ‘Stay the Course’ despite Lower Wage Gains

Raphael Bostic, president of the Atlanta Federal Reserve, said Friday that the December jobs report, which shows a slower rate of wage increases and better-than-expected employment growth, does not change his view of monetary policy. According to the central bank official, interest rates are still expected to rise, reaching well beyond the Fed’s benchmark funds rate of 5%, where it is expected to remain for some time. “It doesn’t really change my outlook at all,” Bostic told CNBC’s Steve Liesman during a live interview at a conference in New Orleans. “I’ve been looking for the economy to continually slow from the strong position it was at in the summertime. This is just the next step in that.” The Labor Department reported that nonfarm payrolls increased by 223,000 last month, while the unemployment rate decreased to 3.5%. That was slightly better than respective estimates for 200,000 and 3.7%.
Moreover, average hourly earnings rose just 0.3% for the month and 4.6% year over year, both below expectations, indicating that the inflation spiral gripping the economy for the past year and a half may be abating. Still, Bostic said he expects another rate increase of either a quarter- or half-percentage point when the Fed releases its decision on Feb. 1. The fund’s rate is currently targeted between 4.25% and 4.5%. Bostic is a non-voting member this year of the rate-setting Federal Open Market Committee; he will vote again in 2024. Open jobs still outnumber available workers by nearly 2 to 1, and wage growth is well above where it was before the Covid pandemic. Bostic added that he doesn’t think wages have been a key driver of the inflation that escalated in mid-2021 toward its highest level in more than 40 years.