MNI POLICY: Fed Bostic: 'Within Shouting Distance' of Neutral

By Jean Yung

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

on Thursday urged caution in making next policy moves, saying interest rates are

close to neutral.

     His comments signal he would support either another rate hike this month or

a pause while the Fed evaluates incoming economic data. 

     "I currently think we're within shouting distance of neutral, and I do

think neutral is where we want to be," he said in remarks prepared for the

University of Georgia Terry College of Business in Atlanta. 

     "I'm not seeing clear signs of overheating, nor am I seeing any indications

of a material weakening in the macroeconomic data at the moment. That said,

should the data deliver clearer signals of either, I would be fully prepared to

support policy actions to mitigate the risks in either direction." 

     Bostic votes on rate settings this year and has so far approved each of the

FOMC's three rate hikes. 

     He said the Fed will need to pay keen attention to data over the next six

to 12 months. 

     Inflation has "softened slightly over the past three months" though it's

close to the Fed's 2% objective. Meanwhile growth is strong but expected to slow

next year as the fiscal stimulus wears off and unemployment is very low. 

     He sees both upside and downside risks to his outlook. Consumer spending is

strong and may prompt businesses to ramp up capital investment to meet future

demand. Among the downside risks are trade tensions, the potential slowing of

the global economy, and recent financial volatility, he said. 

     Still, businesses remain quite optimistic, he noted. 

     "While uncertainty regarding tariffs and changes in trade policy remains a

feature of the economic backdrop, most firms appear to have taken this in

stride," he added. 

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

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