ATLANTA (Reuters) - The Federal Reserve may only need to raise interest rates once in 2019, Atlanta Fed President Raphael Bostic said on Monday, focusing on business executives' nervousness about the economy and a global slowdown as factors that may hold the U.S. central bank back.
"I am at one move for 2019," Bostic said. Though U.S. economic growth was faster than expected in 2018 and prompted the Fed to raise rates four times, Bostic said his business contacts appear less confident about the coming months, while "clouds" have developed overseas.
Bostic is not a member of the Fed's rate-setting policy committee this year. But his comments show how a recent selloff in stock markets, combined with weak economic data from China and Europe, have begun to shift the tenor of conversation at the U.S. central bank.
While U.S. economic data remains strong, the hair-trigger moves in equity markets, doubts about the outcome of U.S. trade negotiations with China, and other factors have led Fed officials to indicate the central bank is likely to slow down from the quarterly pace of rate increases enacted over the past two years.
Particularly as the Fed's short-term policy rate approaches neutral, Bostic said the central bank needs to be careful not to go too far and unintentionally tighten credit markets too much.
"This is an area where we have to watch robustly," he said. The current policy rate of 2.50 percent may be at or close to neutral and "if it is 2.50 and you go to two and three quarters or three, you might have tripped beyond neutral and that would be contractionary."
(Reporting by Howard Schneider; Editing by Paul Simao and Paul Simao)
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