Federal Reserve Bank of Atlanta President Raphael Bostic, who votes on monetary policy this year, said March 23 he would likely support more rate hikes this year.
Bostic voted for the Federal Open Market Committee's March 21 increase in the federal funds rate, which put it at a target range of 1.5% to 1.75%. Still, he said in a speech in Knoxville, Tenn., the Fed needs to keep going with rate hikes.
He also told reporters his forecast had three interest rate hikes in 2018, though he is keeping an open mind on potentially adjusting his outlook depending on economic conditions, according to Bloomberg News.
"With the economy operating near its potential and inflation finally approaching the long-run target, it is appropriate, in my opinion, for monetary policy to be moving toward a more neutral stance," he said in his speech. "By neutral, I mean neither stepping on the gas to move the economy faster nor pumping on the brakes to slow the economy down."
Bostic said the Fed is "at or near" accomplishing its dual mandate of low unemployment and stable prices.
Inflation, he said, has for years been below the Fed's 2% target but is now "trending upward." The latest annual reading of the Fed's preferred inflation gauge put it at 1.5%, though Bostic used a separate annualized six-month figure and noted it reached 2% in January.
"For the first time in a long time, I see the potential for inflation to run somewhat above the Fed's longer-run 2% target as opposed to the below-target rate we have seen over the past six years," he said.
The labor markets, Bostic said, have also strengthened in recent months, with several measures of unemployment now recovered to pre-crisis levels. But there are not yet signs that the labor market has overheated, he added, pointing out that businesses' costs for labor have not accelerated — whether through wages or through other business costs like increased training or adjusting job requirements.
Meanwhile, the recent tax cuts will push up growth, Bostic said, but his conversations with business contacts have not led him to believe there will be a "huge boost to growth" in the next two years. A budget deal that increases federal government spending will also stimulate the economy but does not have a "game-changing sort of effect," he said.
"I hasten to add, however, that the prospects of any significant or pervasive tariffs — and the reactions from trading partners that could follow — represent a counterbalancing downside risk," he said.