The Federal Reserve should increase its benchmark federal funds rate three times this year, but a fourth hike could happen if inflation picks up, two regional Fed presidents said May 24.
In separate CNBC interviews, Atlanta Fed President Raphael Bostic and Philadelphia Fed President Patrick Harker aligned themselves in the slightly more dovish camp of Fed officials, who have largely been split on whether they should opt for three or four rate hikes.
The Federal Open Market Committee is expected to raise the benchmark rate to a target range of 1.75% to 2% when it meets again in June, after lifting it by 25 basis points in March. Fed officials signaled in minutes of this month's FOMC meeting that most of them think the next rate hike should come "soon," though they "expressed a range of views" on how much the Fed needs to tighten.
Harker told CNBC he would back three rate hikes in 2018 and another three the following year, which could take the Fed back to a neutral policy stance after years of stimulative monetary policy. He is not slated to be a voting member of the FOMC either year.
"I think we're getting close to neutral," he told CNBC. "If we see inflation start to accelerate, then I would be open to a fourth increase this year. But I'd have to see evidence of that first."
Bostic, who does vote on the FOMC this year, told CNBC he is "comfortable with three right now" but may upgrade or downgrade that projection depending on how the economy performs. He noted that he kicked off the year supporting two moves but has since backed another one, given the expected stimulus from U.S. tax cuts and increased government spending. He has said that the Fed is "arguably as close" to meeting its dual mandate of stable prices and maximum employment as it has been since the recession.
Bostic also told CNBC that President Donald Trump's cancellation of a summit with North Korean leader Kim Jong Un was a surprise and may have implications for the economy, as business leaders face more uncertainty over whether they should be expanding.
The developments, paired with uncertainty around tariffs, are a "downside risk" to officials' upbeat outlook for the economy this year and may dampen the positive effects of U.S. tax cuts. But he cautioned that the economic effects are dependent on what U.S. policy ends up looking like.
"What I'm hearing from businesses is: 'We're going to just wait, and we're going to see what happens,'" Bostic said.
