Bos­tic Sees Pol­icy Close To Neu­tral, No Over­heat­ing

The Bond Buyer - - Market News - — Gary E. Siegel

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.”

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