Atlanta Federal Reserve President Raphael Bostic said Friday that better-than-expected employment growth in December hasn’t changed his mind on monetary policy. He still sees interest rates rising higher than 5 percent and staying there “for a long time.”

Bostic said the Fed was committed to fighting high inflation and driving down demand in the economy. This means raising interest rates the the 5-to-5.25 percent range. “We are just going to have to hold our resolve,” he told the Atlanta Rotary Club on Jan. 9.

Higher interest rates mean higher borrowing costs, and the expectation is that people will eventually start spending less. The demand for goods and services drops, causing inflation to fall. 

The U.S. job market remained hot in December, with 223,000 non-farm jobs added. The overall unemployment rate went down to 3.5 percent.

As of November, there were about 1.7 job openings for every available worker, an imbalance that is holding despite the Fed’s rate hikes. The strong demand has pushed wages higher, but they haven’t kept up with inflation.

The annual inflation rate for the U.S. is 7.1 percent for the 12 months ending November 2022, according to U.S. Labor Department data published Dec. 13. The next inflation update is scheduled for release on Jan. 12, 2023.

The jobs report “doesn’t really change my outlook at all,” Bostic told CNBC’s Steve Liesman during a live interview Jan. 6 at a conference in New Orleans. “I’ve been looking for the economy to continually slow from the strong position it was at in the summertime. This is just the next step in that.”

Average hourly wages rose 0.3 percent in December and 4.6 percent compared to a year ago, both below expectations and a sign that inflation may be easing, CNBC reported.

To try and slow inflation, the Fed raised interest rates seven times and 4.25 percentage points in 2022 with more rate hikes expected.

Bostic said he expects another rate increase of a quarter- or half-percentage point when the Fed announces its decision Feb. 1. The funds rate is currently targeted between 4.25 percent and 4.5 percent. Bostic is a nonvoting member of the rate-setting Federal Open Market Committee in 2023. He will vote again in 2024.

Bostic said that he did not think wages have been a key driver of inflation. “We’ve got to stay the course,” he said. “Inflation is too high. We need to reduce those imbalances so it moves more rapidly to our 2 percent (inflation) target.”

In their December meeting, Fed officials espressed concern that the public might misinterpret the central bank’s move to a small rate hike — 0.5 percentage point after four straight 0.75 percentage point increases — as an easing in policy.

Asked how long he saw rates above 5 percent, Bostic said: “Three words: a long time … I am not a pivot guy. I think we should pause and hold there, and let the policy work.”

Interest rates will have to remain at a high level “well into 2024,” Bostic told the Rotary Club, and that would it be fair to assume the Fed is willing to overshoot on rate hikes.

Bostic stressed that the Fed can’t “claim victory prematurely” and needs to keep pushing rates higher and keep them there.

He said he envisioned getting “to a place where demand and supply start to become more interbalanced and we start to see those pressures on inflation really start to to come down.”

As for a recession, Bostic said he does not expect a recession to follow the Fed’s actions, but if there is one, he sees it as “short and shallow.”

Atlanta Federal Reserve President Raphael Bostic, screenshot from CNBC TV, Jan. 6, 2023.