Fed's Lockhart Suggests Pace of Four Rate Increases Over a Yearby
Lockhart says 'gradually' means tightening 'not every meeting'
Head of Atlanta Fed, in radio interview, sees global pickup
Federal Reserve Bank of Atlanta President Dennis Lockhart said the central bank’s commitment to a “gradual” tightening suggests interest rates could be raised at every other meeting of the policy-setting Federal Open Market Committee, though the actual pace will depend on incoming economic data.
“Moving up gradually means not every meeting, in all likelihood,” Lockhart said in an interview Monday with WABE, the Atlanta public broadcasting radio station. “The rate of rising interest rates will be more like every other meeting.”
The Fed last week raised rates for the first time since 2006 and said it expected the pace of future tightening to be gradual. Lockhart voted in favor of the statement that announced the quarter percentage point increase in the target range for its benchmark federal funds rate to 0.25 percent to 0.5 percent.
Policy makers separately forecast an appropriate rate of 1.375 percent for the rate at the end of 2016, implying four quarter-point increases in the target range next year, based on the median projection from 17 officials.
The ”important point” is the pace will depend on “how the economy performs,” Lockhart said. “It will be gradually, but data dependent.”
The rate hike reflects a ”solid” outlook for the economy, with inflation likely to move toward the Fed’s 2 percent goal after the temporary drags from lower oil prices and a stronger dollar end, Lockhart said.
Last week’s move ended a seven-year era of ultra-easy Fed monetary policy after officials reduced rates to nearly zero in December 2008 to help the economy recover from the worst recession since the Great Depression.
“The public should see this is a vote of confidence in the economy,” the Atlanta Fed official said. Manufacturing could benefit as global conditions improve, he said, adding that growth in China has stabilized and Europe seems to be picking up.
A former Georgetown University professor, Lockhart has led the regional Fed bank since 2007. The Atlanta Fed district includes Alabama, Florida, Georgia, and portions of Louisiana, Mississippi, and Tennessee.