Liftoff should begin "around mid-year, or a little later," assuming that projections for the economy hold, even if all the Fed's goals aren't met at that point, Federal Reserve Bank of Atlanta President and CEO Dennis Lockhart said Friday.
"As of today, I remain comfortable with the assumption that circumstances will come together around mid-year, or a little later, that will deliver sufficient confidence to begin normalization with the liftoff decision," Lockhart told Southwest Florida Business Leaders, according to prepared text of a speech, released by the Fed. "I won't be more definitive than that. I think all possibilities from June on should remain open. I don't at this juncture have a prediction or preference. Timing will depend on what the data tell us."
"The distance between current conditions and our goals doesn't have to be completely closed for the FOMC to start moving interest rates higher," Lockhart said. "Monetary policy is, of necessity, forward looking. If, as we look forward, it seems likely we will achieve our policy objectives, then we can consider beginning to adjust policy."
The economy is healthy enough for expansion to continue in the medium term, he said, noting he expects 3% growth this year and next, with unemployment and underemployment falling.
"As a general statement, the improvement of economic conditions to date, in combination with the outlook I just outlined, leads me to the view that the economy is on a path to a satisfactory and desirable state of health."
While the economy is growing, "periodic headwinds" have "threatened to dilute or reverse progress," and "its strength has sometimes seemed tentative and fragile."
Further, Lockhart warned, the progress in the labor markets "may be less than meets the eye," with "conventional" tools overstating progress, specifically, he mentioned those working part-time who want full-time work.
Lockhart said the Fed must have confidence that the economy will reach the Fed objectives in a reasonable period, which he define as a year or two. "I really want to emphasize this point. The Committee has repeatedly stressed that the first and subsequent policy moves will be data-dependent. It is confidence based on clear evidence in the data that will trigger the start of normalization."
Full confidence is "never attainable," Lockhart said, "At this particular moment, I don't quite have sufficient confidence."
