Fed’s Bostic Says US Faces a ‘Shaking Out’ on Refinanced Debts

Federal Reserve Bank of Atlanta President Raphael Bostic said the US economy faces a period of some disruption as debts are refinanced at significantly higher interest rates, putting some pressure on both financial institutions and the government.

“We have a lot of existing debt out there that is at very low prices,” Bostic said at the South African Reserve Bank’s Biennial Research Conference in Cape Town. “When that comes due, they’re not going to be able to refinance into comparable prices. There’s going to be an adjustment that needs to happen on that. So I actually think there’s a shaking out that’s about to happen at all levels.”

Bostic, who doesn’t vote on monetary policy this year, has been among the more dovish of US policymakers. On Thursday, he urged that policymakers be cautious and patient because too much tightening risks unnecessary pain for the economy.

After aggressive rate increases in 2022, Fed Chair Jerome Powell and his colleagues have slowed the pace this year, and signaled they may be close to wrapping up.

“So many bankers in our country have never lived in a rising interest rate environment or a higher interest rate environment.” Bostic said Friday. “And so there’s a lot of learning that needs to take place.”