Fed's Bostic Says Job Is to Prevent Inversion of Yield Curve

(Bloomberg) -- Federal Reserve Bank of Atlanta President Raphael Bostic says he’s aware of the dangers of an inverted yield curve, which in the past has been viewed as a sign of impending recession.

“I have had extended conversations with my colleagues about a flattening yield curve” and the risks of it inverting, he said at a moderated forum in Augusta, Georgia on Wednesday. “We are aware of it. So it is my job to make sure that doesn’t happen.”

Bostic, who took office in 2017 and votes on the policy-setting Federal Open Market Committee this year, adds to a chorus of Fed speakers who have raised concern about the flattening yield curve in recent weeks. The spread between 5-year and 30-year Treasuries on Monday touched the lowest level in more than a decade.

Some Fed officials worry about further rate hikes causing the yield curve to invert while others view the process as a normal part of monetary policy normalization as the economy picks up.

Bostic said Wednesday he favors three rate hikes in total this year after three in 2017, though his outlook could change.

“We don’t want to do it so fast that it is disruptive. That is why we are going at a slow, gradual pace,” he said about interest-rate increases. “Hopefully we won’t get to that inversion.”

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