MNI Fed's Bostic: May Not Need As Many As 3-4 Hikes Per Year

--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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