Current economic conditions warrant a “serious discussion” of whether to raise interest rates at next week’s Fed meeting, Atlanta Federal Reserve Bank president Dennis Lockhart said on Monday in remarks that may raise the likelihood of Fed action.
“If 1.6 percent inflation and 4.9 percent unemployment were all you knew about the economy, would you consider a policy setting one tick above the zero lower bound still appropriate?” Lockhart said in a morning address at the National Association of Business Economists. “I think circumstances call for a lively discussion next week.”
He added in later comments to reporters that there was no “urgency” to act at any particular meeting as the Fed debates whether its current ultra-low interest rate remains appropriate for an economy that is “chugging along.”
“I don’t feel that we are incurring costs of patience that put a lot of urgency on the question of raising rates,” Lockhart said. “It is much more the committee deciding what is the right calibration of the policy rate to the state of the economy and the outlook.”
Recent data and contacts with business officials in his southern region, Lockhart said, leave him confident that job growth will continue and inflation eventually rise toward the Fed’s target, putting a rate rise in play.
Though not ruling out some of the more pessimistic arguments of his colleagues who feel the economy may be in a low growth rut, he said he feels progress is continuing and the economy is “not stalling out.”
Growth should strengthen in the second half of the year, moving toward a 3 percent annualized rate, he said. Though weak inflation remains an “awkward” aspect of the Fed’s policy puzzle, he said he remains confident that will rise over time because of still-strong consumer spending and continued job growth.
“Conditions warrant that serious discussion,” when the Fed meets next week, Lockhart said.
Several of the Fed’s regional bank presidents have indicated they are ready to raise rates again, even as some of the central bank’s influential Washington-based governors have indicated they want to wait for more progress on inflation and to be sure that slack in the labor market has disappeared.
(Reporting by Howard Schneider; Editing by Chizu Nomiyama Andrea Ricci)
