Atlanta Fed's Lockhart Says Fed Is Still On Track to Raise Rates This Year
August 24 2015 - 5:00PM
Dow Jones News
NEW YORK—Federal Reserve Bank of Atlanta President Dennis
Lockhart stuck to his guns Monday and said he still expects the
U.S. central bank to raise short-term interest rates in the next
few months, even as he recognized some of the stresses facing the
U.S. economy and financial markets.
"I expect the normalization of monetary policy—that is, interest
rates—to begin sometime this year," Mr. Lockhart said. "I expect
normalization to proceed gradually, the implication being an
environment of rather low rates for quite some time."
What Mr. Lockhart did not do is repeat that he believed the
economy was ready for the Fed to start raising rates in September.
In an interview with The Wall Street Journal on Aug. 4, he
said—speaking for himself—there was a "high bar" for not moving
then.
But that outlook for central-bank policy has become hazier over
the past few weeks. There are significant questions about the Fed
moving to boost the cost of borrowing in the U.S. economy as
China's economy has run into trouble and financial markets have
suffered significant losses. Monday was proving to be a wild ride
for investors across the globe, and many now believe the
instability and questions about the global economy's future should
rule out a Fed rate rise for now. On Monday, Barclays said it now
believes the Fed will raise rates next March, rather than in
September.
Mr. Lockhart, a voting member of the Federal Open Market
Committee, acknowledged the general climate of uncertainty in his
speech at the Public Pension Funding Forum in Berkeley, Calif., but
he didn't comment on the market's most recent developments. Mr.
Lockhart is widely looked to as a centrist on the FOMC and a
reliable guide to Fed thinking, and he said in his speech he is
still hopeful about the future of the U.S. economy.
"The Greek fiscal crisis was unsettling with its potential for a
major financial event or worse," the official said in the speech's
prepared text. He added that current developments like "the
appreciation of the dollar, the devaluation of the Chinese
currency, and the further decline of oil prices are complicating
factors in predicting the pace of growth." That said, Mr. Lockhart
said "our baseline forecast at the Atlanta Fed is for moderate
growth with continuing employment gains and a gradually rising rate
of inflation."
Mr. Lockhart said in his speech he isn't that worried about the
potential of problems within the nation's pension system to cause
greater economic damage.
"I don't see the underfunding of public pension funds as a
systemic risk," Mr. Lockhart said. "Nor do I see state and local
government fiscal stresses, to which pension underfunding can
contribute, plausibly posing systemic-event risk individually or
collectively."
Write to Michael S. Derby at michael.derby@wsj.com
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(END) Dow Jones Newswires
August 24, 2015 16:45 ET (20:45 GMT)
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