Bostic warns that public inflation expectations weakened
- Central bank may not need to hike 3-4 times in 2018
- Rate between 1.25% to 1.50% could be 'approaching' neutral
- Concerned public may lose faith that Fed is committed to 2% inflation goal
- Sees argument for patience
- Sees modest boost from tax overhaul, doesn't see 2018 as 'breakout year'
- Lack of wage and price pressures remains 'puzzling' in light of low employment
- Read the speech here
Dovish stuff from the new voter but not much reaction from the US dollar.
Verbatim:
"Should the recent data unfold in a manner similar to my outlook, I am comfortable continuing with a slow removal of policy accommodation. However, I would caution that that doesn't necessarily mean as many as three or four moves per year.
Recent evidence suggests that the interest rate that would prevail when GDP and inflation are back on target could be close to 2 percent at the moment, and may rise only modestly over the medium term.
If this is right, then the current stance of monetary policy is still somewhat accommodative but is approaching a more neutral stance. Finally, it is important to remember that the Fed is also removing accommodation by shrinking its balance sheet.
To summarize, I see the economy continuing to expand at a modest pace in 2018, with some upside risk associated with recent changes to fiscal policy. Employment gains should remain substantial enough to keep the unemployment rate near its low level, and I expect inflation to track gradually to the Fed's 2 percent target."