Financial Update (Fourth Quarter 2008)

Atlanta Fed President Says U.S. Economy Needs Rebounds in Housing, Confidence

photo of Atlanta Fed President Dennis Lockhart Atlanta Fed President Dennis Lockhart said the country is enduring "a long and difficult adjustment process" that will result in continued weak economic performance for much of 2009. During a Dec. 4 speech to the U.S. Association of Energy Economics Annual Meeting in New Orleans, Lockhart said the following conditions need to be in place for a recovery to take hold: housing sector and house price stabilization, along with a return of consumer confidence and of credit confidence.

Fed's ways to affect monetary policy are numerous
Though there is not much more room to lower the federal funds rate, which is already set at a range of 0 percent to .25 percent, there are other ways the Federal Reserve can help the economy through this difficult period, the Atlanta Fed president said. The Fed can provide liquidity through programs that have been expanded significantly in recent months. And the Fed can continue coordinating policy actions with other central banks.

Text of speech
Lockhart biography

Looking at 2009
As for the Southeast's short-term outlook, the Reserve Bank's president summarized that employment is expected to weaken further, house prices and household wealth will probably continue to decrease, and personal consumption likely will decline, at least for the next few months.

These problems are affecting the entire world. Lockhart pointed out that the International Monetary Fund projects that growth in advanced economies will contract in 2009 for the first time since World War II. Growth for emerging economies also is expected to slow. Lockhart said that if current forecasts are close to accurate, the current quarter and the next couple are likely to be the worst.

"Policymakers have policy tools remaining to respond to unwelcome surprises," he said. "And the intrinsic resilience of the economy at its core combined with the regenerative capacity of the financial system will carry us through."

December 18, 2008