Fed's Bostic: Labor market is 'not yet overheated'

Economy 3/23/2018, 1:26 PM
Fed's Bostic: Labor market is 'not yet overheated'

Raphael Bostic, head of the United States Federal Reserve's subsidiary in Atlanta, estimated on Friday that economic activity is near its potential and that inflation is approaching the goal. Furthermore, he claimed in a speech in Tennessee, "for the first time in a long time" it may even "run somewhat above" the target 2%.

"Many businesses are facing some pressure on labor costs, often in the form of nonwage expenses. Still, these costs do not yet seem to be accelerating, and my belief is that labor market conditions are not yet overheated," the central banker stated and stressed "not yet." Bostic, a voting member of the Fed's policy panel this year, said risks for inflation are on the upside.

Gradual interest rate increases toward the end of the year seem appropriate depending on macroeconomic data, but acting "somewhat less aggressively" may be warranted to see the effect of balance sheet reduction, he added. The policymaker again warned of the danger from imposing trade barriers. He also suggested the benchmark neutral rate for borrowing costs, a measure adjusted for inflation, "will over time fall in the range from 2.25% to 2.75%."

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