Fed’s Lockhart Favors July-Sept. Rate Increase on Weak Jobs

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Federal Reserve Bank of Atlanta President Dennis Lockhart said while recent economic weakness probably won’t persist, he favors pushing out the central bank’s first rate increase beyond the next two meetings.

“I would probably be biased toward the July or September dates as opposed to June,” Lockhart, who votes on monetary policy this year, said in an interview Monday. “We will have more data and we will give the economy a little more time to prove out the thesis that I laid out, that the first quarter was anomalous again, just like a year ago.”

Lockhart echoed Fed presidents William C. Dudley of New York and Jeffrey Lacker of Richmond, who said recent economic weakness doesn’t change their view of the outlook. Dudley earlier Monday said the path of rate increases is likely to be “shallow” once the Fed starts to tighten.

“I’m not ready yet to conclude a slowdown is underway,” Lockhart said. He said he still expects “a moderate pace of growth between 2.5 percent and 3 percent” with “continued progress on employment and a firming up of the price data.”

“I’m holding to the view that we will see a rebound in the second quarter and that we will see a resumption of stronger growth,” Lockhart said.

“It is still reasonable” for the Federal Open Market Committee to “deliberate about liftoff in the middle meetings of the year,” with June, July and September each meriting discussion. “I still think they should be on the table.”

Patient Dropped

The policy-setting FOMC last month dropped an assurance to be “patient” on the timing of the first interest-rate rise since 2006 and described job gains as “strong” in a statement after the meeting on March 18.

That was before a report last week showed U.S. employers added 126,000 workers to payrolls last month, the smallest gain since December 2013 and weaker than the most pessimistic forecast in a Bloomberg survey, a report from the Labor Department showed Friday. The smaller advance in employment broke a year-long string of monthly gains exceeding 200,000, which was the longest such stretch since 1995.

“We clearly hoped for a better number,” Lockhart said. At the same time, “it is simply one month. It is not surprising to have ups and downs.”

Lockhart said the slowdown in employment in March was consistent with “weak first-quarter growth numbers.”

Some reasons for the soft patch are “purely transitory, like weather,” while other effects, such as the strong dollar and falling oil prices, may dissipate over time, he said.

Weak Quarter

“The payroll report was a bit disappointing, but this followed a fairly long run of strong reports,” Richmond’s Lacker said in a statement to Bloomberg following the payrolls report.

Dudley, in a speech earlier on Monday in Newark, New Jersey, said he will be watching “to determine whether the softness in the March labor market report evident on Friday foreshadows a more substantial slowing in the labor market than I currently anticipate.”

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