Atlanta Federal Reserve Bank President and CEO Raphael Bostic said Sunday that the country needs economic pain now to avoid even more pain later.
Appearing on CBS’s “Face The Nation,” Bostic said that in order to rein in sky-high inflation, the Federal Reserve needs to rein in economic demand. To do that, it needs to tighten monetary policy, which he acknowledged would inevitably slow the economy down further. But he said dragging the economy down will mean job losses and economic pain, and that pain is necessary to avoid worse pain later on.
“[I]nflation is high. It’s too high,” Bostic told host Margaret Brennan. “And we really need to do all that we can to make it come down. And when we think about its source, it’s because we have very high demand.”
“We have not enough supply,” he continued. “[W]hat we were hoping would happen is that we’d see some movement on the supply side, to move the supply up so that there wasn’t so much of an auction on goods that are in the marketplace. But that hasn’t happened. And that really has meant that we have had to turn to our policies to try to take demand down.”
Bostic dismissed concerns that the U.S. is already in a recession after two consecutive quarters of negative GDP growth, and claimed that the economy was “still creating lots of jobs on a monthly basis.”
He said the economy still has to slow down, “[b]ut I do think that we’re going to do all that we can at the Federal Reserve to avoid deep, deep pain. And I think there are some scenarios where that’s likely to happen.”
“It’s not going to be easy,” Bostic continued. “There will likely be some job losses. 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.”
Bostic’s comments come as the Federal Reserve increased interest rates by another 75 basis points, or 0.75%, last week. The news sent the stock market tumbling on Wednesday; the Dow Jones Industrial Average closed below 30,000 on Friday, plunging to the lowest level since 2020 and sitting on the edge of bear market territory. Moreover, the Atlanta Fed projected the economy would stagnate in the third quarter; the Bank’s GDPNow tracker predicts just 0.3% annualized GDP growth in the third quarter of 2022.