Federal Reserve Bank of Atlanta President Dennis Lockhart said he prefers to keep interest rates unchanged for now, while anticipating a debate among policy makers about whether to raise them in coming months.
“From my perspective, I like policy where it is,” Lockhart, 61, said in an interview with Bloomberg News in Atlanta on Friday. “I view the current situation as reasonably balanced, with a great deal of uncertainty around both the downsides to growth and the upsides to inflation.”
The economy’s expansion is likely to remain “weak” through the second half of this year, which should help to damp inflation, said the Atlanta Fed chief, who will vote on rates next year. This means “the reasonable policy debate will be around holding versus raising rates,” he said.
“If the inflation numbers remain high — which is another way of saying if I’m wrong — then I may support action earlier,” Lockhart said. He said he was “quite comfortable with the current posture” as long as price gains moderate.
Lockhart’s remarks followed a government report on Aug. 14 that showed consumer prices jumped by the most since 1991 in the year to last month, spurred by energy costs. He said “all” Fed officials are concerned about the “creeping” up in prices, while the slide in oil in the past month will help ease the pressure.
“Certainly, it helps a great deal,” he said. “The outlook for the second half of the year and going into 2009 is we’ll see some alleviation of inflation pressures. Having oil and other commodities come down so strongly helps.”
The Fed kept its benchmark interest rate at 2 percent for the second straight meeting on Aug. 5.
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