Bostic Sees Policy Close To Neutral, No Overheating
With monetary policy close to neutral levels and no signs of an overheating economy, the Federal Reserve should move cautiously, Federal Reserve Bank of Atlanta President Raphael Bostic said Thursday.
The Fed should “proceed cautiously, with a keen eye on the data,” Bostic said in a speech at the University of Georgia, according to prepared text released by the Fed. “This will particularly be the case over the next six to 12 months, as I look for signals in the data that might confirm or refute my current position.”
Bostic, who has a vote this year on the Federal Open Market Committee, added, “I currently think we’re within shouting distance of neutral, and I do think neutral is where we want to be. I’m not seeing clear signs of overheating, nor am I seeing any indications of a material weakening in the macroeconomic data at the moment.”
While he wouldn’t predict what will happen at the Fed meeting Dec. 18-19, Bostic said he would keep an open mind in case data “deliver clearer signals of either” weakening or overheating, and “I would be fully prepared to support policy actions to mitigate the risks in either direction.”
Any while the goal is achieving neutral policy — one that neither stimulates nor restricts economic growth — the problem is “this neutral rate is not something we observe directly, and as such, we can only infer its position.”