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The Atlanta Fed


Lockhart Describes Obstacles Facing Economy; Foresees Start of Modest Recovery in Second Half of 2009

For immediate release: Feb. 19, 2009

Lockhart Describes Obstacles Facing Economy; Foresees Start of Modest Recovery in Second Half of 2009

BIRMINGHAM, Ala.–Dennis P. Lockhart, president and chief executive officer of the Federal Reserve Bank of Atlanta, today said the U.S. economy faces obstacles that are likely to work against a strong rebound of growth over the next few quarters. But he does foresee catalysts for the start of a modest recovery in the second half of 2009.

Speaking at a business outlook conference hosted by the Birmingham Regional Chamber of Commerce, Lockhart described a sharp pullback in consumer spending and said a cascading drop in business activity in late 2008 and early 2009 has taken a severe toll on the U.S. labor market. "During the past 12 months our economy has lost a net of 3.5 million jobs, with about half of those losses in the past three months."

With regard to his outlook, Lockhart said he expects unhealthy credit markets, an excess supply of houses and low business and consumer confidence will weigh on growth for the next several quarters. But he anticipates some factors suggesting improvement as the year progresses. These factors include a reduction of excess business inventories, lower mortgage interest rates helping housing markets on the margin, the fall of energy prices and the potential for improving consumer confidence.

Another factor Lockhart cited in his outlook is the effect of policy. "Responding to the scope and severity of our economic ills, policymakers have taken and will soon implement unprecedented measures to restore financial stability and economic growth. In my view, the diagnosis is substantially correct and the actions targeted on discrete aspects of the overall problem constitute an appropriately comprehensive approach."

In evaluating the coherence of the policy effect, Lockhart said he applied the following criteria:

  • Is the problem correctly diagnosed?
  • Is the response to each dimension of the problem sufficiently sized?
  • Is the response timely?
  • And, is the specific policy reversible when required or appropriate?

"I believe the composite policy approach is correct in focus and intent, and now the devil is largely in the details and implementation," he said. "I am confident policymakers across the various relevant arms of government understand the importance of moving ahead as quickly as possible to provide detailed rules of the road."

A transcript is available. A podcast recording will be available after delivery.

The Federal Reserve Bank of Atlanta serves the Sixth Federal Reserve District, which encompasses Alabama, Florida, Georgia and parts of Louisiana, Mississippi and Tennessee. As part of the nation's central banking system, the Atlanta Fed participates in setting national monetary policy, supervises numerous commercial banks and provides a variety of financial services to depository institutions and the U.S. government.