The first interest rate hike is apt to be in "the middle of the year," according to Federal Reserve Bank of Atlanta President Dennis Lockhart, who said he purposely used the vague term because the exact timing of the first increase isn't extremely important.
"The key liftoff decision criteria ought to be closely linked to the FOMC's two principal policy objectives-maximum employment and low and stable inflation," Lockhart told the Rotary Club of Atlanta, according to text released by the Fed. "In my view, the biggest factor influencing the actual timing of a liftoff decision should be the Committee's confidence that these objectives will be achieved in an acceptable timeframe and, especially, that inflation will move at deliberate speed toward the target of 2 percent per annum."
If momentum from 2014 carries into this year and the outlook remains "solid," he said a rate hike in mid-year "will in all likelihood be justified."
Lockhart suggested data may be considerably ambiguous data in the first half of the year, which would make the decision to increase rates more difficult.
"If the early months of this year bring mixed news on the economy, the risk manager in me will lean to preferring a later date for the first policy move to an earlier one. That said, after six years of recovery and considering all that that has both transpired and been accomplished, I don't think we policymakers should get too rigid about liftoff a little earlier or later. My preferred timing may not be the Committee's consensus decision," he said.
He added, "I supported and expect to continue to support a patient approach, one that is relatively cautious and conservative as regards the pace of normalization of rates."
Also, Lockhart reminded, liftoff "will not constitute the throwing of a switch from easy money conditions to tight. The rate environment will remain stimulative, even as the policy rate gradually rises, as I expect. The pace of rate increases will not be preordained. The path of policy will depend on the ongoing performance of the economy."
