Fed’s Bostic: Economy in ‘pretty good place’ to let rate rises continue

By Howard Schneider

SAVANNAH, Ga. (Reuters) – The U.S. economy “appears to be in a pretty good place” that should let the Fed continue its steady program of raising interest rates, Atlanta Federal Reserve bank president Raphael Bostic said on Monday.

Bostic said the Fed’s target policy rate was “getting close” to a neutral setting in which it is neither encouraging nor discouraging spending and investment, and that he is comfortable continuing those increases as long as growth holds up.

“Should the recent data unfold in a manner similar to my outlook, I am comfortable continuing to move policy toward a more neutral stance,” Bostic said in remarks prepared for delivery to the Rotary Club of Savannah. Though he did not in his prepared text specify how many more rate increases he expects this year, he has in the past said that at least one and perhaps two more rate rises could be appropriate if the economy continues growing as expected.

That aligns him with the current Fed consensus. At its rate meeting last week U.S. central bankers raised rates and indicated it was likely to do so two more times this year.

Bostic said the hope is to land the economy in a sweet spot of continued low unemployment and stable inflation.

Recent strong growth has put those two goals in view. Though he said some of that recent strength is likely to prove temporary, such as a recent run-up in mining industry investment, there is also little sign of a “dramatic” boost in inflation or an “unsustainable” rise in wages.

“The economy is about as close to target as we’ve seen” of an expansion entering its 10th year, Bostic said. “With conditions reasonably close to the FOMC’s dual mandate of full employment in the context of stable prices, the real work begins…We want to ensure that the economy is not overheating, but we also do not want monetary policy to become too restrictive and threaten to choke off the expansion.”

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