Fed's Bostic: Fed's employment mandate, doing pretty well; inflation is lower than we'd like – Reteurs

Atlanta Federal Reserve Bank President Raphael Bostic said, on the Federal Reserve's employment mandate, "doing pretty well; inflation is lower than we'd like" and that the Federal Reserve will be able to keep rates where they are for the time being, 

"In general I think both on the inflation and employment side, we are performing pretty much close to target if not right on it, so that's encouraging," Bostic said at a Global Interdependence Center conference in San Diego.

"I think that can be sustained for a while, and so in that context, I think our policy stance of stability makes a lot of sense."

Key comments

• Says PCE may be giving us a low-ball estimate of where inflation really is; all other metrics suggest it is almost right at target.
• Says Fed may want to look at a menu of inflation measures, not just the PCE.
• Says on both mandates we are performing pretty much close to target if not right on it.
• Trade tensions are still there, but trade deals may have put a floor under them.
•  We won't see a tremendous pop from the resolution of trade deals.
• Fed will taper the pace of repo activity, but balance sheet will still grow, though slowly.
• Fed still views its balance sheet as a possible policy tool, but policy rate is the main tool.
• Fed's Bostic says he's open to changing fed's inflation framework so that the target is a range, or an average, or a state-contingent range.
• Fed's Bostic says understanding about the new coronavirus is changing every day, makes it hard to say what's going to happen.
• Fed's Bostic says a material change to him would mean large numbers of businesses changing their plans on investment, hiring.
• Bostic says if there's a change in mindset among businesses, will start to think about how to adjust his outlook.
• Bostic says there's a lot of unsettled space when it comes to digital currency.

FX implications

Given that he Fed cut rates three times last year to a target range of 1.5% to 1.75%, and most policymakers have signalled it will likely be appropriate to leave them there through the end of 2020., the US dollar is taking its cues elsewhere for the meantime. However, by contrast traders are betting the Fed will need to cut rates again by June