SAVANNAH, Ga. (Reuters) - The United States may be in line for an interest rate hike as soon as April, Atlanta Fed President Dennis Lockhart said on Monday, another sign that policymakers are comfortable allowing U.S. monetary policy to diverge from other major economies.
Lockhart said the decision to hold rates steady at last week’s Fed policy meeting was more about ensuring that recent global financial volatility had settled down, a “patient” approach which he said he supports.
But given continued U.S. economic growth, “there is sufficient momentum evidenced by the economic data to justify a further step at one of the coming meetings, possibly as early as the meeting scheduled for end of April,” Lockhart said in a speech to the Savannah Rotary Club in Georgia.
Lockhart’s remarks and those recently made by other policymakers, including San Francisco Fed President John Williams, reflect an emerging consensus at the U.S. central bank that U.S. growth remains intact despite a weak global economy, and that rates can rise perhaps another half percentage point this year.
Projections issued by Fed policymakers last week showed that 13 of 17 of them expected from one to three rate hikes by the end of the year - a relatively tight spread - with a majority of nine clustered at two hikes.
Lockhart said that reflected a “pretty uniform” view on the rate-setting committee of how monetary policy is likely to evolve this year and how the economy is likely to perform.
“The center of the committee is pretty uniform at the moment,” Lockhart told reporters after his speech. “That reflects a similar assessment of the momentum of the economy.”
Though global economic conditions remain uncertain, U.S. domestic consumption is holding up well, with low unemployment and better household financial conditions fueling family spending.
“Short of some big shock that turns consumer psychology on its head, I see no reason why consumer spending growth should not continue. I think the conditions supporting this engine of economic momentum are likely to hold steady,” Lockhart said.
The economy is approaching full employment, Lockhart said, and reaching the Fed’s 2 percent inflation target may be in sight.
That has occurred despite concerns at the start of the year that an economic downturn in China, weak commodity prices, and a rush towards negative rates by central banks in Europe and Japan would hold down prices and growth globally, foiling the Fed’s effort to coax U.S. rates higher.
Reporting by Howard Schneider; Editing by Paul Simao