by Howard Schneider

ATLANTA (Reuters) – A further 25 basis point interest rate hike in the United States may allow the U.S. Federal Reserve (Fed) to end the current monetary tightening cycle with a dose of confidence that the U.S. inflation will gradually return to the 2% target, said Atlanta Fed President Raphael Bostic.

Recent U.S. inflation data, including monthly consumer and producer price indicators, “are consistent with us making a final decision,” he said in an interview. to Reuters on Thursday. “We have a lot of elements that suggest we are on the way to 2%,” he added.

For now, the Fed is expected to raise the cost of credit by a quarter point at its May 2-3 meeting, bringing the federal funds rate to 5.00%-5.25%, a level unprecedented since the fall of 2007, just before the onset of the recession.

When updating the Fed’s rate projections in March, ten officials, in agreement with Raphael Bostic, said another increase in the cost of credit would likely be the last, while one said he was ready to give it up and opt for an immediate break. Seven other officials, on the other hand, felt that a higher rate was still necessary to contain inflation.

According to Raphael Bostic, the aggressive rate hikes decided last year when the cost of money was close to zero, are only now beginning to “bite” on the economy.

For him, therefore, the current situation offers a good opportunity to mark a pause in rate hikes, in order, he says, to study the evolution of the economy and inflation and try to limit the damage. on growth and jobs.

“There’s still a lot to do. I think the next step will be to figure out how far,” he said, noting that inflation remained two to three times above the Fed’s target, in depending on the criteria selected.

But “I think the goal is to hit the target and hold it unless you see a trend that’s irrefutable, that’s going in an uncomfortable direction,” he added. , referring to the Fed’s goal of getting sufficiently restrictive on interest rates and leaving them unchanged for a potentially extended period of time until inflation declines.

(Report Howard Schneider; Claude Chendjou, edited by Blandine Hénault)

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