MNI POLICY: Fed's Bostic Sees Gradual Hikes Over Next Quarters

By Jean Yung

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

on Thursday reaffirmed his commitment to move U.S. interest rates toward

neutral, calling for "a gradual increase in nominal interest rates over the next

handful of quarters" in light of above-trend growth. 

     The U.S. economy has "moved much closer" to price stability, Bostic said,

while the unemployment rate is performing better than it has in the past two

decades. On the other hand, there is little evidence inflation is accelerating

materially beyond its recent 2% pace, he added.

     "When the economy is doing well and standing on its own, as it is now, I

think monetary policy ought to be moving toward a neutral stance," he said in a

speech prepared for an economic education conference in Jackson, Miss. 

     His remarks come two weeks before the Federal Open Market Committee is

expected to nudge rates another quarter-point higher this month, to a target

range of 2% to 2.25%. Bostic is a voting member of the FOMC this year. 

     He also repeated his warning that prolonged worries over U.S.-imposed

tariffs and possible retaliation from trading partners could pose negative risks

for the economic outlook, though they appear to have had "only a small negative

effect" on investment so far. 

     A third of manufacturers surveyed by the Atlanta Fed in July reported they

are reassessing capital expenditure plans because of trade worries, which could

translate to a bigger negative effect on business investment down the line, he

said. 

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

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