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(X1) Probes The Bull Trigger

--Risk of Falling Inflation Expectations Argues for Patience 
By Jean Yung
     WASHINGTON (MNI) - Federal Reserve Bank of Atlanta President Raphael Bostic
said Monday he is comfortable with incremental interest rate increases but that
the economy may not need as many as three or four hikes per year. 
     Economic growth looks solid for the year and modestly above the average
pace of the expansion, but inflation and wage growth are still lagging, said
Bostic, who votes on rates this year. With a risk of inflation expectations
becoming anchored below 2%, the Fed can be patient in raising rates, he said. 
     "Should the recent data unfold in a manner similar to my outlook, I am
comfortable continuing with a slow removal of policy accommodation. However, I
would caution that that doesn't necessarily mean as many as three or four moves
per year," he said in remarks prepared for the Rotary Club of Atlanta. 
     Bostic said he was "somewhat encouraged" that the last couple inflation
reports have been a bit stronger than earlier in the year, but "I view the
possibility that the public believes inflation will persistently fall short of
the 2 percent objective as a risk." 
     Survey responses as well as market-based estimates of inflation
expectations indicate the public may not be "completely convinced about the
symmetry of the FOMC's inflation objective," Bostic said. 
     "This possibility is one factor that might argue for being somewhat more
patient in raising rates, even as the inflation rate moves toward the 2 percent
objective," he said. 
     His baseline outlook has inflation hitting 2% by the end of the year while
GDP growth comes in in a 2.2% to 2.5% range. 
     Republican-enacted tax reform appears to have little changed business's
expansion and investment plans, according to surveys conducted by the Atlanta
Fed and interviews with business leaders, Bostic said. 
     "I'm marking in a positive, but modest, boost to my near-term GDP growth
profile for the coming year," he said. 
     "For now, I am treating a more substantial breakout of tax-reform-related
growth as an upside risk to my outlook."
--MNI Washington Bureau; +1 202-371-2121; email: jean.yung@marketnews.com
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