(Bloomberg) -- Federal Reserve Bank of Atlanta President Raphael Bostic said the central bank can accommodate an overshoot of its inflation target and he isn’t worried by the impact of oil prices rising past $70 a barrel.
The Fed’s preferred measure of inflation hit 2 percent in March and that is “a good thing for us,’’ Bostic told reporters Monday at the bank’s financial markets conference on Amelia Island, Florida. “We’re fluctuating around the 2 percent target. I am comfortable with that. To the extent we have seen some upward pressure, we don’t have the ability to stop trends on a dime. Some overshoot is fine.’’
The Federal Open Market Committee last week left interest rates unchanged, acknowledging inflation is close to target without indicating any intention to veer from its gradual tightening of monetary policy.
Officials signaled their willingness to allow inflation to exceed the 2 percent goal somewhat by adding a second reference to the “symmetric” nature of their target in the policy statement of their May 2 decision. Data released two days before the meeting showed the Fed’s preferred inflation gauge hit 2 percent in March after being below that goal for most of the last six years.
The uptick in inflation has occurred as energy costs increase, though Bostic said the rise in oil prices past the $70 per barrel milestone for the first time since 2014 should have a “less dramatic’’ impact than surges in energy prices have had in prior decades.
“There will be some impact on that but I am not hearing from anybody that right now they are expecting this trend up in oil prices to fundamentally change the trajectory of the economy,’’ he said.
Bostic also said it remains puzzling why U.S. wages aren’t rising more broadly in light of the country’s very low jobless rate. Unemployment fell to 3.9 percent in April for the first time since 2000. Average hourly earnings increased 0.1 percent from the prior month and 2.6 percent from a year earlier, both less than projected.
“We would have expected there to be some significant upward pressure on wages,’’ he said. “What we are seeing is there is some in some sectors but it is not widespread. Ultimately I do think if the market continues the way it is going, we are going to see wages start to go up because we will truly have a scarcity in labor in a wide range of sectors.’’
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