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Fed no longer has to step on the gas, says Atlantas Bostic



The risk of a strong overheating of the economy is why the Fed should stick to its interest rate hike, Atlanta Federal Reserve President Raphael Bostic said Tuesday.

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"After browsing through the data, consulting our business models, and gaining a Main Street perspective from our extensive network of business contacts, I feel that economic growth is on a strong course," he said. "It has a solid base and was not pushed much higher or lower."

The speech comes when the Fed raised its benchmark interest rate target three times this year and is in fourth place in December. Current forecasts by members of the Federal Open Market Committee suggest three more increases in 2019 and one or two more in 2020.

The rhetoric of central bank officials has been largely restrictive lately. Fed chairman Jerome Powell said in an interview recently that the central bank is "far from reaching a neutral rate that is neither stimulative nor restrictive to growth. The September meeting pointed to further increases.

In fact, Bostic said he found it hard to find synonyms for "strong" to describe the economy.

"That does not mean that the path is immobile for the economy," he said. "For a central banker like me, there are plenty of reasons to worry, but in my view, the economy is good enough to survive on its own without the support of an accommodative monetary policy."

Markets will take their first look at third-quarter GDP on Friday. Current expectations are around 3.3 percent, although Atlanta's Fed tracker estimates it at 3.9 percent.


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