Federal Reserve Bank of Atlanta President Dennis Lockhart said the Fed won’t change policy in response to Hurricane Sandy and the impact of the superstorm’s destruction on U.S. growth may be temporary and modest.
“Although Katrina obviously had a devastating effect on the local economy, it did not have a significant effect on the national numbers overall,” Lockhart told reporters after a speech in Chattanooga, Tennessee, referring to the hurricane that hit New Orleans in 2005.
The central bank need not make a “direct, targeted” response to the disaster because any harm to the U.S. economy would be transitory, Lockhart said. “That impact is likely to pass and therefore it is not necessarily something that monetary policy can or should address.”
Atlantic storm Sandy may cut U.S. economic growth by $25 billion in the fourth quarter, according to Gregory Daco, a U.S. economist at IHS Global Insight in Lexington Massachusetts. He said that could reduce the fourth quarter pace of growth to a range of 1 percent to 1.5 percent, from the firm’s earlier estimate of 1.6 percent.
Lockhart said “it would not surprise me if there is a measurable fourth quarter effect” on growth from Sandy, given the large population of the Northeast. Rebuilding after the storm could be “a form of stimulus.”
Lockhart, a former Georgetown University professor, has led the Atlanta Fed since 2007. The Atlanta Fed district includes Alabama, Florida, Georgia, and portions of Louisiana, Mississippi, and Tennessee.