Tags: Federal Reserve | Dennis Lockhart | Economy | Rates

Fed's Lockhart: 'Murky' Data Complicate Rate-Hike Plans

Thursday, 16 April 2015 01:24 PM


A "murky" run of first-quarter data highlighted by a weak March employment report and an oil-driven downturn in investment is masking the U.S. economy's underlying strength and complicating the Fed's interest rate plans, Atlanta Federal Reserve Bank President Dennis Lockhart said on Thursday.

The Fed's decision on when to raise rates, Lockhart said, may come down to waiting longer in hopes of more convincing proof of the economy's strength, or pushing through an earlier increase but moving slowly from then on.

The U.S. central bank has said it will consider rate hikes on a meeting-by-meeting basis, beginning in June, though investors and many economists don't expect an increase until at least September.

“Falling unemployment and rising inflation may be unlikely in the very near term. In my working forecast, inflation does not pick up until the second half of the year,” he said.

"Ideally, I'd like to see direct, affirmative evidence in the data that the desired outcomes are in fact materializing," Lockhart told a business group in West Palm Beach, Florida, adding that a more solid footing for the initial rate hike could allow a steadier and more predictable path for subsequent increases.

“This test would call for a falling unemployment rate and rising inflation,” he said.

"The more solid the data evidence underpinning lift-off, the more predictable the subsequent rate path can be," he said.

But Lockhart, who is a voting member of the Fed's rate-setting committee this year, also cautioned that certainty about the Fed's goals may not be available when lift-off occurs.

He added that he "can get comfortable" with the idea that actual increases in inflation may be too far off to wait for the initial rate increase.

Overall, he said, the economy appears to be growing above trend, and he expects that to continue through the year.

"A murky economic picture is not an ideal circumstance for making a major policy decision," Lockhart said. But "in spite of the recent weakness, I do not believe the economy in some fundamental way is faltering, stalling, slowing."

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A murky run of first-quarter data highlighted by a weak March employment report and an oil-driven downturn in investment is masking the U.S. economy's underlying strength and complicating the Fed's interest rate plans, Atlanta Federal Reserve Bank President Dennis Lockhart said.
Federal Reserve, Dennis Lockhart, Economy, Rates
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2015-24-16
Thursday, 16 April 2015 01:24 PM
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