|Lockhart: Weak First Half of 2008 Followed by Improvement
Atlanta Fed President and Chief Executive Officer Dennis Lockhart said that while the economy is in a period of heightened uncertainty, he expects a weak first half of 2008—but one with modest growth—followed by gradual improvement beginning later in the year.
Housing, markets will bear watching
Lockhart said he is watching two dynamics especially closely. The first is the effect of declining house prices on the consumer and the effect this decline could have on retail sales and other personal spending. He also is looking at the effect of financial market distress on credit availability and, in turn, on business investment, general business activity, and employment.
Overall economic health is the key matter
He acknowledged that right now, "the times present even greater uncertainty than usual. Recently, the negative information has been exceeding expectations. I think these circumstances call for policymakers to be prepared to respond pragmatically. In my view, pragmatism in the face of growing weakness in the general economy may very well require additional moves to lower the federal funds rate."
Lockhart also said that 2008's economic performance hinges on how financial markets deal with their problems. He described modern financial markets as an intricate global network of informed trust. "Stabilization will proceed from clearing up the information deficit and restoring well-informed trust in counterparties and confidence in the system overall," he said.
January 25, 2008