The Federal Reserve is still likely to raise interest rates this year, a key official on the central bank’s monetary policy committee said Monday amid massive volatility in U.S. markets.
“I expect the normalization of monetary policy — that is, interest rates — to begin sometime this year,” Federal Reserve Bank of Atlanta President Dennis Lockhart said in a speech prepared for an event in Berkeley, Calif.
Lockhart’s comments Monday signaled commitment to raising interest rates, but they were less straightforward about the likelihood of a rate hike at the Fed’s upcoming September meeting than his previous statements have been.
As recently as Aug. 10, Lockhart said the economy was strong enough for the Fed to begin raising short-term interest rates from their current near-zero level. He also said that he was not likely to be swayed from that opinion by incoming economic and financial data.
The past few days’ plunge in stock prices, however, have led to rising doubt that the Fed will raise rates in September.
A rising dollar, China’s devaluation of the yuan, and falling oil prices are “complicating factors in predicting the pace of growth,” Lockhart said.
Lockhart has cast himself as a moderate on the 10-member monetary policy committee. He is neither a “hawk,” eager to raise rates to prevent the possibility of too-high inflation, nor a “dove,” more concerned about unemployment than inflation rising too fast.
He explained Monday that rates will remain low no matter what happens at the Fed’s upcoming meeting.
“I expect normalization to proceed gradually, the implication being an environment of rather low rates for quite some time,” he said.
