Fed's Lockhart: too soon to contemplate rate hike

CHATTANOOGA, Tennessee (Reuters) - Federal Reserve Bank of Atlanta President Dennis Lockhart said on Wednesday that it was premature to start raising interest rates, but he expected the Fed's balance sheet would start to shrink next year.

"It is too early to be contemplating a rise in the fed funds target," Lockhart told reporters after a speech here, referring to the central bank's overnight lending benchmark, which is currently pegged between zero and 25 basis points.

"I am in the camp that believes that because of a somewhat subdued, if not lackluster recovery, that it would be advisable to be patient with that," he said.

Lockhart, a voting member of the Fed's policy-setting committee this year, was speaking after addressing the Chattanooga Area Chamber of Commerce over lunch.

(Reporting by Alister Bull, Editing by Diane Craft)