Fed's Bostic: Gradual Rate Rises Appropriate Over Next Several Years
November 14 2017 - 1:37PM
Dow Jones News
By Michael S. Derby
Montgomery, Ala.--Federal Reserve Bank of Atlanta President
Raphael Bostic said Tuesday the U.S. central bank should press
forward with interest-rate rises.
But the official didn't offer any clues about the timing of when
he would prefer the central bank to boost rates again, as he did in
remarks in September. Mr. Bostic, one of the Fed's newest regional
bank presidents, made his comments in a speech before a local group
in Montgomery, Ala.
"I think it will be appropriate for interest rates to rise
gradually over the next couple of years, as our policy position is
still very accommodating rather than neutral," Mr. Bostic said.
"How gradual that pace will be depends on the strength of the
incoming macroeconomic data and what it implies for the economic
outlook."
Mr. Bostic isn't currently a voting member of the interest-rate
setting Federal Open Market Committee. It next meets in
mid-December in a gathering that is widely expected to result in a
quarter percentage point increase in what is now a 1% to 1.25%
overnight target rate range. If the Fed follows through, it would
be the third increase of the year.
Mr. Bostic said he believes the growth and hiring outlook
supports a move higher in interest rates, but like many, he notes
weak price pressures relative to the Fed's 2% price goal complicate
that outlook.
"All of this anecdotal information convinces me that a
reasonable economic forecast for the foreseeable future is more of
the same: GDP growth continuing a bit above 2%, the unemployment
rate in the low 4s, and modest increases in real wage growth," Mr.
Bostic said.
The official said the economy is near full employment and has
withstood the impact of the recent hurricanes. He said he doesn't
expect to see the economy surge, and added possible tax law changes
"could be one of the needle-movers on economic activity."
Mr. Bostic noted that inflation has "softened" over the course
of this year.
"While I'm still holding to the view that the recent weakness
largely reflects idiosyncratic noise, I'll be watching the next few
inflation reports closely for signs of a pickup," he said.
Fed officials like Minneapolis Fed leader Neel Kashkari have
warned that it is a big mistake to raise rates when inflation is so
far short of the central bank's 2% target. But other Fed officials
like Philadelphia Fed leader Patrick Harker have said they are
still leaning toward a December rate rise, and others have made the
case rates need to rise before the Fed hits its target so as not to
allow the economy to overheat, which could force a more aggressive
course of increases.
Write to Michael S. Derby at michael.derby@wsj.com
(END) Dow Jones Newswires
November 14, 2017 13:22 ET (18:22 GMT)
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