MNI: Bostic Says Fed Can Wait For More Clarity On Outlook

Atlanta Federal Reserve President Raphael Bostic said Thursday the effects of US trade tariffs may be slower and more persistent than initially expected, and there is no immediate need for shifts in monetary policy. 

"A period characterized by such widespread uncertainty is no time for significant shifts in monetary policy," he said in prepared remarks. "That is especially the case against the backdrop of a still resilient macroeconomy, which offers space for patience."

Uncertainty is coming from sources other than trade including US fiscal, immigration, and regulatory policy, Bostic said. They "are all changing or apt to change in the short term, and along with global geopolitical tensions those changes could produce a range of macroeconomic impacts," he said.

"I fully support the Committee’s wait-and-see policy prescription at our latest meeting. I believe the Committee must await more clarity rather than move in a policy direction that it might need to quickly reverse," the Atlanta Fed chief said. (See: MNI INTERVIEW: Bostic Backs Go-Slow On Rates As Tariffs Linger) 

FRAMEWORK REVIEW

The Fed is in the final stages of a policy framework review and Bostic noted "the primacy of inflation expectations."

Anchoring expectations at the 2% target is important in the FOMC's strategy "but it is worth exploring ways in which the primacy of inflation expectations could be made absolutely explicit," he said.

"Research, along with feedback from forums such as the Fed Listens public events that were part of the framework review, support the notion that the Committee would do well to lean in even more on understanding the role of inflation expectations in shaping realized inflation."

In a keynote speech in Frankfurt, Germany, Bostic said there's work to be done directly linking inflation expectations to concrete actions by economic agents—to understand the very nature of inflation expectations. "The Committee, and indeed central banks around the world, will need to wrestle with this conundrum."