Fed's Bostic : Economy Doing Fine, Fed Should Stand Pat On Rates

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01/13/2020 | 08:50 pm

By Michael S. Derby

Atlanta Fed leader Raphael Bostic offered an upbeat view of the U.S. economy in a speech Monday, in remarks that showed no appetite for a change in interest rates.

"The economy is doing fine," Mr. Bostic said in an appearance in Atlanta. In this environment, "there is not a lot we have to do to really to stimulate or slow down" the overall course of economic momentum, he said.

When it comes to interest-rate policy, "we should just sit back and let the economy do what it's doing and be ready for that next move in either direction," Mr. Bostic said. He added that there is a "high bar" for the central bank to consider putting its interest-rate target range into restrictive territory.

Mr. Bostic's remarks arrive as the late January meeting of the Federal Reserve looms closer into view. After lowering their overnight target rate range last year three times to between 1.50% and 1.75%, Fed officials are broadly in agreement that no change in rates is likely this year unless the economy's performance surprises in some notable fashion.

In his remarks, Mr. Bostic, who doesn't have a vote on the rate-setting Federal Open Market Committee this year, said the consumer sector continues to do well and is the backbone of the economy right now.

The official also said that, as the Fed considers an overhaul of its policy-making system, he isn't sure whether it would be better for the central bank to target an exact point for inflation, as it does now with its 2% goal, or whether an inflation range would better reflect real-world developments.

Mr. Bostic also pushed back at those who believe central bank policy is pushing the stock market higher. He said financial markets are "a derivative signal" of what is happening in the broader economy. He echoed comments of central bankers in the past and said he isn't that focused on what is happening with stocks and played down concerns that the Fed's move to grow the size of its balance sheet is directly driving stock prices higher.

Write to Michael S. Derby at michael.derby@wsj.com

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