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US Fed could raise rates by half a point if needed

NEW YORK (AFP) – The United States (US) Federal Reserve is not ruling out raising rates by half a percentage point if inflation remains high, Fed official Raphael Bostic said in an interview with the Financial Times.

The chair of the US central bank, Jerome Powell, signalled this week the Fed plans to hike interest rates in March, telling reporters the recovery in the world’s largest economy is strong enough that it can handle higher borrowing costs.

Powell declined to give details on the size of the planned increase, saying only that the Fed would be flexible. It typically raises rates by a quarter of a percentage point; a half-point increase would be uncommon.

In an interview with the Financial Times published on Saturday night, Bostic, who heads the Federal Reserve Bank of Atlanta, said that “every option is on the table for every meeting.”

He still expects three quarter-percentage-point hikes by the end of the year. But “if the data say that things have evolved in a way that a 50 basis point move is required or (would) be appropriate, then I’m going to lean into that.” Fifty basis points equal half a percentage point.

Bostic stressed that he would be “comfortable” with the idea of making a decision “in successive meetings,” suggesting there could be a rate hike at each of the seven remaining meetings between now and the end of the year.