Growth has been strong enough for the Federal Reserve to being raising interest rates, a key Federal Reserve official said Monday.
In a public speech in his home district, Federal Reserve Bank of Atlanta president Dennis Lockhart said the job gains and output growth over the course of the recovery make him “comfortable that the economy can handle a gradually rising interest-rate environment.”
Unlike other Fed officials, Lockhart is not closely watching each economic report as it comes out in deciding whether it’s time to raise the central bank’s interest rate target, he said.
Instead, he suggested, zero rates were an extraordinary response to the financial crisis, and are no longer warranted given the progress the country has made. “Conditions are no longer extraordinary,” he said.
Lockhart is a voting member of the Fed’s monetary policy committee, and has cast himself as a centrist between the committee’s “doves” who are more willing to risk higher inflation by keeping rates low, and the “hawks” who want tighter monetary conditions. His comments Monday suggested that he would be a vote in favor of a rate hike at the Fed’s upcoming September meeting, the outcome of which has been the subject of extensive speculation by investors.
One factor that has made Fed officials hesitant to raise rates is the fact that inflation has run near zero in recent months, well below the Fed’s 2 percent longer-run target.
Fed vice chairman Stanley Fischer hinted earlier Monday morning that inflation might still be too low for the Fed to raise its interest rate target.
But Lockhart waved away that argument in his speech, and said he expected inflation to rise as economic growth picked up in the second half of the year.
