Fed has room for two more rate increases in 2017, Lockhart says

The Federal Reserve has room for two more rate increases this year, as the economy seems "reasonably close" to full employment and is likely to gather pace, former Federal Reserve Bank of Atlanta president Dennis Lockhart said.
The Federal Reserve has room for two more rate increases this year, as the economy seems "reasonably close" to full employment and is likely to gather pace, former Federal Reserve Bank of Atlanta president Dennis Lockhart said.PHOTO: REUTERS

SINGAPORE (BLOOMBERG) - The Federal Reserve has room for two more rate increases this year, as the economy seems "reasonably close" to full employment and is likely to gather pace, former Federal Reserve Bank of Atlanta President Dennis Lockhart said.

"The committee is pretty solidly optimistic about the outlook for at least the medium term, and that would be the continuation of a moderate pace of growth," Lockhart said in an interview with Bloomberg Television's Yvonne Man in Hong Kong. "It's appropriate to begin to remove a little bit of the ultra-accommodation."

The Fed on March 15 raised its target for the benchmark federal funds rate by a quarter point to 0.75 per cent to 1 per cent and released quarterly forecasts showing that officials expect to hike twice more this year, according to their median estimate.

Lockhart, who retired at the end of February, said the Fed is not behind the curve, and he would have supported the rate increase earlier this month. With the unemployment rate at 4.7 per cent, the economy is "reasonably close" to full employment, he said.

While there are indications that US first-quarter economic growth may be "quite low" at about 1 per cent, the pattern of recent years may be repeated, with accelerated expansion seen in the second quarter and later in the year.