The president of the Atlanta Federal Reserve, Raphael Bostic, would be “comfortable” with an interest rate hike in September, if the economic data looks as he anticipates it will, he said during an interview Friday with FOX Business.
Policymakers at the Fed have already voted to hike the benchmark federal funds rate twice this year, and are expected to do so twice more in 2018. Bostic, however, projected only three rate hikes this year, making the September rate hike the third and final one this year.
“I’m still there,” he said from the annual gathering of global central bankers in Jackson Hole, Wyoming, meaning that he doesn’t expect to be voting for another one at the Fed’s December meeting. “But if [the economy] comes in a little hotter, that might impact my longer run trajectory.”
And if it comes in a little cooler? Bostic said he’d be comfortable with an “even deeper pause,” especially if there are any signs that the auto industry is starting to struggle. Higher rates can impact consumers by increasing borrowing costs, which have already skyrocketed. Auto loan rates are at a nine-year high, and 30-year fixed mortgage rates recently climbed to their highest level in seven years.
During the highly anticipated meeting on Friday, Fed Chair Jerome Powell said in the keynote address that expects the central bank will continue on its current path of gradually raising interest rates, but noted the importance of striking a balance between premature tightening and shoals overheating.
Investors were watching closely to see whether Powell would address the economic impact of an international trade war that’s spawned billions of dollars in tariffs. It could force the Fed to reverse course if Powell seems concerned that it could rattle a strong economy.
Although Powell did not directly address the trade spat, Bostic warned that trade headwinds could be stunting some of the gains from fiscal stimulus by spooking investors in an otherwise strong economy that has low unemployment and a steady inflation rate.“The uncertainty around trade policy is something that comes up all the time when I talk to my contacts,” he said. “It’s hard to make long-term investments when we don’t know what the rules are...a lot of businesses in our sector are just stepping back and waiting.”