Dennis Lockhart, president and chief executive officer of the Federal Reserve Bank of Atlanta, gave a speech on Wednesday to the Greater Miami Chamber of Commerce (obviously in Miami, Fla.). While individual Fed presidents speaking can create noise rather than predictions, this will keep the rate-hike timing of the Federal Reserve in-line with what Janet Yellen originally said.
Lockhart’s speech targeted economic progress and talked about his own approach to evaluating the economic progress. On the tapering, Lockhart said that he continues to support the phase-out of the asset purchase program. His signal is that, at its current pace, the tapering will end entirely in October or December of 2014.
Another telegraph made is that, with the asset purchases tapering predictably, the focus has jumped to when the FOMC will actually start the “process of liftoff” for the federal funds rate. Lockhart feels that sustained GDP growth of around 3% will bring a movement to justify “a gradual liftoff in policy rates sometime in the latter half of 2015.”
The Fed president also emphasizes that the main instrument of monetary policy is forward guidance regarding the path of interest-rate policy, as well as guidance regarding the conditions that will justify such a liftoff. He is also looking to a “dashboard” of labor market indicators to gauge economic growth.
On the Fed’s dual mandate of full employment and price stability, Lockhart’s speech said:
The FOMC has chosen to define price stability in terms of a targeted rate of inflation of 2 percent over the longer term. Consistent with my belief that the economic growth rate will rise, unemployment will decline, and resource slack in the economy will shrink, I expect inflation to firm to a healthier rate over the medium term on a track to the FOMC’s 2 percent target.
Dennis Lockhart’s full speech is here.