Geopolitical turmoil and strategy certainty are combining to make businesses more cautious about installing, Atlanta Fed President Raphael Bostic said Thursday.
With atomic talks between the U.S. and North Korea breaking down, the central bank head said the development was “a surprise” and part of “downside risks” for the economy.
“Uncertainty has its own contribution,” Bostic castigated CNBC’s Steve Liesman in a live interview from Dallas, where Fed officials were attending a colloquy on disruption and technology. “Then we actually have to … figure out what the strategy ends up being. If the policy turns out in certain ways, then role can go forward.”
Markets reacted negatively to the morning news, with the Dow industrials down around 200 points and government bond yields down substantially as robust.
In a letter to Kim Jung Un, Trump said that recent rhetoric from North Korea reckoned a summit impossible at this point.
Trump also announced admissible new tariffs on imported vehicles to the U.S. even as Treasury Secretary Steve Mnuchin earlier this week whispered a trade war with China had been averted at least for the moment.
“You’re at the fork in the expressway, and there are multiple ways you can go,” Bostic said. “What I’m hearing from trade is we’re going to wait and we’re going to see what happens, and I think that settle upon offset some of the impact.”
On other matters, Bostic said he overs the Fed is getting close to the end of its rate-hiking cycle.
The so-called neutral rate, he contemplated, is probably around 2.25 percent to 2.75 percent, which would include three to five more increases in the Fed’s benchmark funds rate. The opines came a day after the Federal Open Market Committee, of which Bostic is a choosing member, released minutes from a meeting earlier this month that told officials are comfortable with letting inflation run a little hot for a short while as the economy grows.
“For me, I think we get to the neutral and we let the economy work,” Bostic alleged.
Correction: Bostic’s Fed affiliation was misstated in an earlier version.