MNI POLICY: Fed's Bostic: Reevaluate Stance at Neutral Rate

--Bostic: 'Still A Few Rate Hikes Away" From Neutral

By Jean Yung

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

on Tuesday called for gradual increases in interest rates until policy reaches a

neutral setting, which he judges to be "a few rate hikes away." At that point,

he said he would reevaluate the appropriate stance of policy. 

     "We ought to shift into neutral," he said in remarks prepared for a

business roundtable in Baton Rouge, Louisiana. "While there is some uncertainty

surrounding estimates of neutral, as evidenced by the latest Summary of Economic

Projections from the FOMC, my assessment is that we are still a few rate hikes

away." 

     At that point, he continued, "I will look to see if consumers and

businesses continue to act in ways that do not suggest a buildup of excesses. If

that continues, it will give me confidence that the economy is on a sustainable

path." 

     Bostic voted for the past three rate hikes this year and said nothing to

suggest he would veto another widely anticipated increase in December. 

     He sees risks as "tilted to the upside," he said, as the fiscal stimulus

has pushed growth well above its potential. However, tariffs and trade tensions

pose headwinds for the economy, he added. 

     Bostic also explored the argument that running a so-called "high-pressure

economy" can help draw disadvantaged workers back to the labor market but said

it's unclear whether these benefits are lasting. 

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

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