Bostic Sees Inflation Hitting Fed Goal in Next Quarter or Two

(Bloomberg) -- Federal Reserve Bank of Atlanta President Raphael Bostic sees a buoyant U.S. economy lifting inflation to the central bank’s 2 percent target “sometime in the next quarter or two” but said he doesn’t think this should prompt the central bank to choke off the expansion.

“I am actually very comfortable going above the 2 percent by some amount -- 2.2, 2.3 -- I don’t think that is a crisis of overheating,” he told Bloomberg Television’s Michael McKee in an interview Thursday in Sarasota, Florida. “I think it is also important that we take a stance so that everyone understands that the 2 percent level is an average, not a ceiling.”

Bostic, a voter this year on the policy-setting Federal Open Market Committee who supported its decision to increase borrowing costs last month, has said that his forecast calls for three interest-rate increases 2018. That places him at the center of the consensus among U.S. central bankers.

The Fed, which has undershot its inflation target for most of the past six years, is weighing whether tax cuts and spending increases signed by President Donald Trump will boost U.S. growth to such an extent that it warrants additional policy tightening. Bostic sounded more concerned about ensuring inflation reached its target.

“I have some concerns we have been below for so long that if we go to 2 percent and do a hard stop and act aggressively to hold it at 2, that will send a signal that we really view 2 percent as a ceiling,” he said.

--With assistance from Shobhana Chandra

To contact the reporter on this story: Steve Matthews in Sarasota, Florida at smatthews@bloomberg.net.

To contact the editors responsible for this story: Brendan Murray at brmurray@bloomberg.net, Alister Bull at abull7@bloomberg.net.

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