Fed’s Bostic still expects one more rate increase in 2018

KINGSPORT, Tenn. (Reuters) – Atlanta Federal Reserve Bank President Raphael Bostic said on Monday he is maintaining his expectation for one more interest rate hike this year, as trade tensions and international events add some downside risk to an otherwise strong U.S. outlook.

“The risks are balanced in the sense that we had a significant stimulus through the tax reform and the spending package. That is all upside risk … Then you have all these other things going on to cause sort of an offset to some extent,” Bostic told reporters in Kingsport, Tennessee.

“I came in the year with three moves and I am still in that space.”

The U.S. central bank has raised rates twice this year and is poised to do so again in September. Bostic is a voter on the Fed’s policy-setting committee and had earlier said he was open to a fourth rate increase if the economy outperformed.

But between the risks of a global trade war, a collapse in the Turkish lira whose speed caught him “by surprise,” and other events, Bostic told reporters he has not changed his underlying view.

The core Fed outlook is for two more rate increases this year.

At a lunch with the Chamber of Commerce here, Bostic repeated his view that the uncertainty around U.S. trade policy may be crimping investment and making companies hesitant to commit funds in an environment where prices could change quickly and supply chains be disrupted.

It is, he said, the chief risk facing a U.S. economy he feels is ready to do without the monetary stimulus the Fed has provided since the 2007-2009 financial crisis and recession.

“We have been on this gradual walk to get to a more neutral position and that is what we are going to continue to do,” he said, setting the stage for continued Fed interest rate increases this fall.

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