Rocky Roads Ahead – Rates to Remain High into 2024?
Raphael Bostic, the President of the Atlanta Federal Reserve posted an essay on March 1, 2023. In it, he highlights specific strategies that will combat inflation and reverse the course of rising rates.
One in particular that he mentioned is the gap between labor supply and demand. Pre-pandemic the gap between available jobs and employed workers sat around one million. Post-pandemic that number has consistently sat around four million. This means that employers are having a harder time filling available positions. Only by increasing wages significantly are they able to fill these positions. But, as the Federal Reserve wants inflation to hover around that 2% mark, a 5% increase in wages is not in line with that goal.
Another topic mentioned in the essay is that “Interest rates are not sufficiently influencing business activity.” While some industries such as real estate have slowed down, other industries have not seen the level of slowdown that he is looking for. The crucial idea here is that Mr. Bostic wants businesses to be proactive and believe that their industry will slow down, influencing their hiring and investment plans.Because of these beliefs and others, Mr. Bostic is advocating for a federal fund rate to be between 5 and 5.25 percent into 2024. To read the entire essay please click here. For more information, please reach out to the Professionals at The Center for Financial, Legal, & Tax Planning, Inc., at (618) 997-3436.