More rate hikes are necessary to ensure sustainable economic growth, given the upward drift in inflation over the last two years, Atlanta Federal Reserve president Jack Guynn said on Wednesday.
"Given my current outlook for the economy, my personal view is that we've not yet reached a neutral policy stance," Guynn said in remarks released by the Fed.
Economists say the Fed is moving slowly toward a "neutral" interest rate policy, which is neither stimulative nor aimed at cooling an overheating economy.
Experts however differ on exactly what a neutral rate is.
The Fed earlier this month raised the benchmark federal funds rate for the eighth successive time, by 25 basis points to 3 percent, at its last meeting to quell signs of inflation in the world's biggest economy.
"I believe the economy remains on a solid and sustainable path of growth," Guynn said.
Businesses continue to "ramp up" their investment spending, and consumer spending "keeps chugging along," Guynn said.
"Taken as a whole, these and other factors suggest that our economy has ample strength to withstand further removal of accommodative monetary policy -- in my view, a step that is needed to sustain economic growth," Guynn said.
Guynn attributed some recent signs of a slowdown to "general skittishness about the run-up in energy prices."
Some businesses have postponed investment plans in light of the high cost of energy, but "there has been no sense of panic," Guynn said.
Guynn also said he was sticking with his forecast calling for the nation's GDP to grow in a range of 3.5 percent to 4.0 percent for this year.
Guynn said that inflation has been trending higher over the past two years.
He noted rising prices for gypsum, scrap steel, and cement. There was more "pass through" of higher energy costs into consumer prices, he added.
"My point is that all of the inflation measures over the past seven or eight quarters show a similar -- but distinct -- upward tilt," Guynn said.
Guynn said he was also worried about reports of growing speculative activity in US housing markets, where investors buy properties simply to "flip" them for a quick profit.
"I have to tell you that some of these stories we're hearing about residential speculation make me uncomfortable," Guynn said.
Guynn said that Fed policymakers are facing more questions about the "end game" for the rate-hiking cycle.
"Going forward, we are approaching an increasingly uncertain time for monetary policy," Guynn said.
The Fed's goal is to return rates to a so-called neutral level, where growth can continue without inflation running hotter.
"While I see no sign of an imminent and substantial pickup in inflation, we will need to be especially sensitive to incoming data and new developments on prices," he said.
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