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REPEAT:MNI POLICY:Fed's George Supports Gradual Rate Increases

Repeats Story Initially Transmitted at 17:20 GMT Oct 11/13:20 EST Oct 11
By Jean Yung
     WASHINGTON (MNI) - Having largely achieved its dual mandate, the Federal
Reserve should continue its campaign of gradual interest rate increases to
prolong the economic expansion, Kansas City Fed President Esther George said
Thursday. 
     The following are key points from her remarks prepared for an economic
forum in Tulsa, Okla. 
     --Gradual policy normalization through rate hikes and a shrinking balance
sheet appropriately balances risks to the outlook. "This gradual normalization
of policy seems appropriate to me given that the FOMC's employment and inflation
objectives have largely been achieved while the current setting of its overnight
interest rate target remains below estimates of its longer-run value."
     --The accommodative stance of monetary policy that has prevailed, even as
the unemployment rate has fallen below estimates of its long-run sustainable
level, could push inflation "somewhat higher" over the next couple of years. But
she said it's reasonable to expect "low and stable inflation for the next few
years." 
     --The economy's limited reaction to changes in oil prices is quite
different today compared to the 1970s and '80s. "The inflationary effects are
viewed as temporary rather than persistent because of the anchoring of inflation
expectations around 2 percent."
     --On balance, fiscal tailwinds and robust consumer and business spending
should prolong the expansion. "Accommodative financial conditions, elevated
levels of confidence and solid labor markets" should culminate in "economic
growth slightly above trend with low and stable inflation." 
     --Recent dollar appreciation, possible retaliatory tariffs and a slowdown
in emerging market economies could cause net exports be a "modest drag" on
overall growth, but she expects domestic demand to "remain strong" and reinforce
the outlook for a tight labor market. 
     George will not vote on rates in the November and December FOMC meetings,
but will be a voter in 2019.
--MNI Washington Bureau; +1 202-371-2121; email: jean.yung@marketnews.com

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