Federal Reserve Bank of Atlanta President Dennis Lockhart said the U.S. economy has made enough progress to warrant raising interest rates soon, even if incoming economic indicators are mixed.
“I think the point of liftoff is close,” Lockhart said in remarks prepared for delivery in Atlanta on Monday. “As the Committee approaches what I consider a historic decision, I am not expecting the data signals to point uniformly in the same direction. I don’t need this.”
Because of “the progress made over the recovery and the overall recent tone of the economy, I for one do not intend to let the gyrating needle of monthly data be the decisive factor in decision making,” he said.
Lockhart, who votes this year on monetary policy, has consistently sided with the Federal Open Market Committee majority, led by Chair Janet Yellen. The FOMC, which next meets Sept. 16-17, is considering when to raise rates for the first time since 2006.
The central bankers said in a statement after their July gathering that they needs to see “some further improvement in the labor market” to help justify a rate increase, in addition to being “reasonably confident” inflation will move back to its 2 percent goal in the medium term. Employers added 215,000 jobs in July and the unemployment rate held at a seven-year low of 5.3 percent, a Labor Department report Friday showed.
Lockhart said his “most important message” is that interest-rate increases are likely to be gradual after liftoff.
One reason for this stance is that inflation has remained “chronically” below target, with falling oil prices a recent contributing factor, Lockhart said.
“Those downward pressures on the rate of inflation are not yet entirely behind us,” he said. “Because of such factors, it has been difficult to discern the true underlying rate of inflation and its trend. This analytical challenge continues, and I expect it to persist for a while.”
The Fed’s preferred gauge of inflation pressures rose 0.3 percent in June from a year earlier. It hasn’t reached the central bank’s 2 percent goal since April 2012.