Atlanta Fed CEO: Economy "Noticeably Better" in 2012
The recent spate of positive economic news suggests that the recovery may be gaining traction, said Atlanta Fed President Dennis Lockhart during a Valentine's Day speech in Sarasota, Florida.
Improvements in employment, household income, and credit expansion, among other factors, have bolstered Lockhart's view that "economic growth in 2012 will be noticeably better than 2011." Indeed, his outlook calls for 2.5 percent to 3 percent growth this year, barring shocks. This caveat is an important one given the role that shocks played in 2011, when higher commodity prices, supply chain disruptions, and other unexpected developments contributed to a markedly slower pace of growth than many economists had forecasted.
Policy statement reflects reality
These adjustments will not happen overnight, he noted. Accordingly, the 2014 policy statement reflects "the reality of where the economy is and what lies ahead."
However, Lockhart emphasized that this should not be viewed as a commitment to keep rates low, but rather as a conditional statement that is "based on a best estimate of the path the economy is on." Thus, the time horizon could change if the economy performs contrary to the FOMC projections.
Communication a policy tool
Despite recent good news about the economy, Lockhart remains cautious. "We haven't seen enough sustained improvement to be sure it will last," he said. "I am prepared to be somewhat patient and watch how the situation develops."
February 29, 2012