The president of the Federal Reserve Bank of Atlanta told the Rotary Club of Baton Rouge today that the U.S. economy’s sluggish performance in the first quarter was probably an aberration and not indicative of a long-term trend. Still, Dennis Lockhart said he wants to see more evidence that the economy is getting back on track before deciding whether to recommend an interest rate hike.
“I’m not taking much signal from the first quarter,” Lockhart said. “I believe the underlying fundamentals are strong enough to propel the economy along a growth path that delivers a bounce-back in the second quarter followed by a resumption of a pace of growth between 2.5% and 3%.”
The first quarter of 2015 showed real GDP growth of just 0.2%, a marked slowdown from growth of 5% and 2.2% experienced in the third and fourth quarters of 2014, respectively. Early estimates for the second quarter of this year are also disappointing, but Lockhart said it’s too early to put much stock in those predictions.
Lockhart’s comments are significant because many central bank watchers have been expecting the Fed to raise interest rates this year. Last week, the Fed’s policy arm, the Federal Open Market Committee, met and decided to hold rates steady for now. But Lockhart says the FOMC will “soon be considering” a major policy change.
Before he is willing to weigh in on that change, Lockhart wants to see more performance indicators, specifically data on levels of consumer spending, which accounts for more than two-thirds of the U.S. economy.
“The near-term growth picture has yet to come into focus,” he said. “The outlook depends heavily on the pace of consumer spending.”
Prior to his address to the Rotary Club, Lockhart spoke to the Louisiana Chemical Association. His remarks here made national headlines in financial publications that include The Wall Street Journal.
While the Atlanta Fed president is keeping a close eye on national economic indicators, he noted the Louisiana economy is bucking national trends and performing very well.
“Louisiana always has its own peculiar dynamic going on, whether it’s from oil and gas, the petrochemical industry or recovery from a storm,” he said. “We have to filter what we hear in Louisiana to put it in a national context, and I mean that as a compliment. You have a really great economy here, not aligned with the national economy, and that’s a good thing.”
—Stephanie Riegel
