A top Federal Reserve official says he's "not in a rush" to start raising the central bank's rock-bottom interest rates despite his view that the economy is improving after a weather-related winter slowdown.
Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, said Tuesday night that he anticipates the first increase would not come until the second half of next year and would "begin a cycle of gradually rising rates" designed to prevent harm to the recovery.
His comments in a speech at Louisiana State University's Graduate School of Banking came as pressure mounts on central bank policymakers to take the next step in tightening monetary policy as they wind down their monthly bond-buying stimulus program.
The Fed has kept its benchmark short-term interest rate at near zero since late 2008 to try to encourage economic growth. But the move has hurt savers and, critics have warned, risks fueling high inflation.
Fed Chairwoman Janet L. Yellen and other central bank officials have suggested that they could start raising rates in the middle of next year, but that the increases would be gradual to keep monetary policy loose for a while as the economy continues to recover.
Lockhart, a non-voting member of the policymaking Federal Open Market Committee, said he had a "pretty optimistic outlook" for economic growth for the rest of the year.
He forecast an annualized growth rate of about 3%, with the unemployment rate continuing to drop and inflation remaining below the Fed's yearly target of 2%.
The economy's poor performance in the first three months of the year "can be explained mostly by bad weather," Lockhart said.
Economic data from March and April are consistent with a rebound from the slow winter, he said.
But although such improvement "will likely bring about conditions in which higher interest rates will be appropriate," Lockhart said more evidence is needed for him to consider the economy strong enough to take that step.
"One quarter's data isn't enough. I expect it will take a number of months for me to arrive at conviction on that account," he said.
With the Fed set to end its bond-buying program by the end of the year, Lockhart acknowledged that there's lots of speculation "about the timing of 'liftoff' -- the date when the FOMC will begin to move the policy interest rate higher."
"For the reasons I have discussed, I, as one policymaker, am not in a rush to get to liftoff," he said.Copyright © 2014, The Baltimore Sun