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On June 29, 2023, Atlanta Fed president and CEO Raphael Bostic is speaking in Dublin to the Irish Association of Investment Managers on the fight to bring down inflation.
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Based on the latest Summary of Economic Projections, the median Federal Open Market Committee participant appears to believe the FOMC needs to do more in the short term to get inflation to the Committee’s 2 percent target.
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Bostic does not fully share this view. He says we can expect continued progress on inflation without additional changes in the federal funds rate.
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If inflation continues to fall—as he believes is likely—the current policy stance may effectively become tighter, as real short-term interest rates increase. Bostic thinks of this dynamic as “passive tightening.”
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Bostic believes we are just beginning to see signs that the cumulative effects of monetary policy adjustments are appearing in the real economy.
Thank you, Alison, for the kind introduction. I also want to warmly thank the Irish Association of Investment Managers, and in particular Chair Paul Price, Vice Chair Ann Prendergast, and CEO Michael D’Arcy for having me. I’m honored. Your domestic economy is dynamic and shares important ties with the United States, so I hope you find my comments helpful.
Be assured that since I’m speaking between you and dinner, I won’t go on too long. But I am covering nuanced material, so I want to be clear and thorough.
As I’m sure most of you know, the Federal Open Market Committee, or FOMC, voted a couple of weeks ago to maintain the federal funds rate, the Fed’s primary monetary policy tool, in the range of 5 to 5 1/4 percent. That meeting was one of four each year when all Committee participants submit projections for the current and subsequent years for gross domestic product (GDP) growth, the inflation rate, the unemployment rate, and the end-of-year level of the federal funds rate.
The projections are collectively called the Summary of Economic…
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