JACKSON, Miss. (Reuters) - There may be room for the U.S. jobs market to improve further without pressure on inflation, an argument for the Fed to be patient as it considers further rate increases, Atlanta Federal Reserve bank president Raphael Bostic said on Thursday.
Bostic said he agreed the Fed should be gradually moving rates higher, toward an estimated “neutral” setting, and that the process could continue for at least a “handful of quarters.”
But in elaborating on that comment, he said the increases would not necessarily have to come on a quarterly basis, and that he was not ready to commit to raising rates twice more this year compared to only one more time.
The Fed is widely expected to raise rates later this month, with a second increase considered probable in December. Bostic said that with no sign of inflation accelerating, he would take a “wait and see” approach.
“There is still some uncertainty as to whether we are really at full employment...and if there is not a risk of overheating then we have the possibility to be more patient,” said Bostic, a voter on interest rate policy this year.
The Fed has raised rates twice so far this year.
Recent strong growth, consumer spending, and other data mean the current “gradual” pace of rate increases ought to continue as the Fed lifts rates toward a neutral stance, versus rates remaining low enough to still be deemed “accommodative,” Bostic said.
Bostic said he is open to the possibility that the neutral rate itself may be rising, which some Fed officials have begun suggesting. If it has, that would possibly mean the tightening cycle would last longer, and rates would move higher, than is currently expected.
But he also said he is not ready to shift gears yet, and still sees the Fed reaching neutral after perhaps just three more rate hikes.
Though growth is strong and unemployment hovering at a near two-decade low, he said neither inflation data, nor his business contacts in the southeast district, lead him to think inflation is about to accelerate. In that situation, he said, there is no reason to rush.
“Our contacts are not telling us that the economy is about to run super hot. I am just not getting that,” Bostic said.
Reporting by Howard Schneider; Editing by Andrea Ricci