A top US central banker appears to have cooled to the idea of an interest rate hike next month, saying on Monday that the Federal Reserve will likely begin raising rates “sometime this year.”
Just two weeks ago, Atlanta Fed President Dennis Lockhart told reporters he was “very disposed” to a rate hike in September. In prepared remarks on Monday, Lockhart did not go into any detail or emphasize what appeared to be a change in that view, but his comments suggested recent market turmoil, a strengthening dollar and a drop in oil may have played a role.
Lockhart is considered a centrist on the Fed’s policy-setting panel, which is set to consider its first rate hike in nearly a decade when it meets next month. Amid an ongoing U.S. stock market rout and fear of China’s slowdown, some economists have pushed back their expectations for a rate hike until later in the year, or even into 2016.
“Currently, developments such as the appreciation of the dollar, the devaluation of the Chinese currency, and the further decline of oil prices are complicating factors in predicting the pace of growth,” Lockhart said on Monday.
U.S. stocks ended the day with steep losses in volatile trading, tracking global shares lower after a near-9 percent dive in China shares and a tumble in oil prices.
Still, Lockhart reiterated his own bank’s baseline forecast of moderate economic growth, continued employment gains, and gradually rising inflation.
“I expect the normalization of monetary policy – that is, interest rates – to begin sometime this year,” Lockhart said. “I expect normalization to proceed gradually, the implication being an environment of rather low rates for quite some time.”