"If the economy evolves roughly as I suspect, I will likely
support further increases over the course of the year," Atlanta
Federal Reserve Bank President Raphael Bostic said in remarks
prepared for delivery to the Knoxville Economic Forum.
Six-month core inflation is now at 2 percent, and unemployment
of 4.1 percent is at or below precrisis levels; those two data
points, he said, "give me confidence we are at or near the
(Fed's) sustainable employment and inflation objectives."
The Fed raised interest rates earlier this week and forecast two
more rate hikes for 2018 and three each year after that,
highlighting its growing confidence that tax cuts and government
spending will boost the economy and inflation.
Bostic voted for the rate increase and on Friday said it made
sense, given the outlook. He added, however, that though labor
markets are "not yet overheated," there are risks to the upside
on labor costs. There are also upside risks on inflation, he
said, and while it is likely to remain calm, for the first time
in many years runs a risk of rising "somewhat above" the Fed's
Not all in Bostic's forecast was rosy. The threat of tariffs,
and potential retaliation by trading partners, poses as much of
an upside risk to the economy as fiscal stimulus does to the
upside, he said Friday.
And he said it is important to raise rates only gradually toward
a neutral level of perhaps 2.25 percent to 2.75 percent,
particularly as the outlook for inflation is uncertain and the
effects of reducing the Fed's massive balance sheet are still
"With the economy operating near its potential and inflation
finally approaching the long-run target, it is appropriate, in
my opinion, for monetary policy to be moving toward a more
neutral stance," he said.
(Reporting by Ann Saphir; Editing by Chizu Nomiyama)
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