Still favors 3 hikes in 2018 (one less than the dot plot)
He adds:
- inflation symmetry is important for us
- will let data signal if we need stimulus, restrictions
- 2.25 – 3% reflects a neutral policy rate
- some factors in yield curve are independent of economy
- Fed cannot afford to be cavalier about the shape of yield curve
- putting a lot of work into researching metrics to show when economy approaching neutral rate
- not to stress that the economy needs no monetary stimulus at this point
- Feds expected overshoot of 2.1% inflation in coming years is no material different from target of 2%
The Fed tightened by 0.25% last week to bring the target range to 1.75%-2.00%. The Fed said they expect 2 more hikes in 2018 and 3 in 2019. If done, that would take the rate to 3%-3.25% - above the high neutral rate that Bostic is speculating on.
