Fed’s Bostic says rates may rise or fall in 2019

Federal Reserve Bank of Atlanta President Raphael Bostic said he sees no need to adjust U.S. monetary policy and that an interest-rate cut or increase are equally likely this year.

“If you ask me how the scales are, I don’t feel like for me they are tilted more to the cut than to the hike,” Bostic said Monday in a Bloomberg Television interview with Michael McKee from Amelia Island, Florida, where the bank is hosting its annual financial-markets conference. “I think we are pretty much in balance.”

The Federal Open Market Committee earlier this month held borrowing costs steady and said it would be patient in adjusting rates either up or down. Markets, however, have priced in the likelihood of a reduction amid signs of slowing growth and a mounting U.S.China trade dispute, while President Donald Trump has called for a full percentage-point cut.

“There are a lot of risks out there which if they come to fruition might have the economy weaken,” Bostic said. “If that happens, then a rate cut might be appropriate. But there are also a lot of sources of uncertainty that if they are resolved in particular ways the economy might actually get a whole lot stronger, which could suggest we might want to

do a rate hike.”

Bostic said he supported the four rate hikes last year and didn’t view the December increase as a mistake in light of growing concerns at the time.

“I actually think the policy course we have done has been exactly on point,” he said. “I think the economic performance would bear that out. We’ve seen growth continue above the long-term trend and we haven’t seen very much inflation as well to suggest that the economy is overheating. So I think we are in a pretty good place.”

Bostic said he didn’t see signs of financial imbalances that are destabilizing, and he’s not seeing the kind of risk-taking typical in the late stages of an economic expansion, though uncertainty over trade policy is affecting business decisions. “I am not seeing risks to suggest we are at a tipping point where the economy should or might turn,” he said.

Some Fed policy makers including Esther George, Kansas City Fed president, have worried that low interest rates could spur too much risk taking and result in asset-price bubbles, which helped to cause the last two recessions.