MNI Fed's Bostic: Above-2% Infl Consistent With Policy Path

--Trade Worries Enough to Sideline Business Investment

By Jean Yung

     WASHINGTON (MNI) - Federal Reserve Bank of Atlanta President Raphael Bostic

on Wednesday was the latest official to drive home the message that the Fed see

itself on track to achieving its dual mandate and moving policy back to neutral.

     He said in a speech that measured inflation is "already effectively on

target" and that he wouldn't be "surprised to see a modest overshoot of our

longer-run target." 

     "In my judgment, such an outcome is not a problem that would, in and of

itself, necessitate a more aggressive policy response," he said in remarks

prepared for the World Affairs Council Global Business Luncheon in Jacksonville,

Fla. 

     "Rather, it is a feature of a well-calibrated approach that moves monetary

policy to a neutral stance that will support both strong labor market conditions

and our longer-run symmetric inflation goal." 

     Bostic votes on the rate-setting Federal Open Market Committee this year. 

     The economy is close to full employment but "not yet significantly beyond

that point," he said. The labor market, while tight, is not overheated. Overall

wage growth remains "tepid" but is increasing. It is possible that the natural

rate of unemployment has fallen, he said. 

     --TRADE BIGGEST RISK

     Bostic flagged uncertainties over trade policy as "perhaps the most obvious

risk facing the economy at the moment," potentially capping the stimulus to

business investment spending as a result of tax cuts. 

     "Swelling optimism over tax policy in the beginning of the year has now

been replaced almost completely by uncertainty regarding the proposed tariffs

and the possibility of a trade war," he said, citing conversations with

businesses in his Fed district. 

     "I have gathered little indication that firms are pulling back on

investment projects that are already in progress. But investment projects slated

for the pipeline have been pushed out," he said. 

--MNI Washington Bureau; +1 202-371-2121; email: jean.yung@marketnews.com

[TOPICS: MMUFE$,M$U$$$]