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Dennis Lockhart talks about monetary policy

Stephanie Johnson

Keynote: The Fed's Lockhart shares his views on U.S. economy (Part 1 of 6)

Fed’s Lockhart answers key questions on U.S. monetary policy

In a September 25 speech before the Mississippi Council on Economic Education, Federal Reserve Bank of Atlanta Chief, Dennis Lockhart, shared his views and outlook on U.S. monetary policy. How does he see things over the medium term? This series looks at Lockhart’s take on the U.S. economy and a few of its key indicators, including gross domestic product (or GDP), inflation, and unemployment.

Both equity and fixed-income investors keep a close watch on GDP, inflation, and unemployment to get a sense of where the U.S. economy is heading. Investors in stocks found in equity exchange-traded funds (ETF), such as the SPDR S&P 500 ETF Trust (SPY), the Vanguard Total Stock Market ETF (VTI), or the SPDR Dow Jones Industrial Average ETF (DIA), look to benefit when economic conditions are improving. Meanwhile, fixed-income investors, such as those invested in the Vanguard Total Bond Market ETF (BND) or the iShares Barclays Aggregate Bond Fund (AGG), tend to watch for inflationary pressures that could lower their prices.

On GDP

Lockhart expects the GDP to grow at an average annual rate of 3% effective this quarter and continuing through next year.

On inflation

Lockhart estimates that inflation will initially run below the Federal Open Market Committee’s longer-term target of 2%. He does, however, expect inflation to firm up gradually as the economy continues along a 3% growth track.

On unemployment

Unemployment and underemployment should continue to decline at a steady pace over the medium term, according to Lockhart. He believes the U.S. will approach a state of near full employment by late 2016 or early 2017.

Dennis P. Lockhart

Dennis P. Lockhart is the 14th Chief of the Federal Reserve Bank of Atlanta. He assumed office in March 2007. Lockhart tends towards a more centrist viewpoint. Lately, however, Lockhart has shown support for the current quantitative easing plan. He could be characterized as somewhat dovish for believing that the monetary policy is on track. Yet Dennis Lockhart believes that the U.S. economy’s fundamentals are stronger and that basic conditions, such as banking, housing, energy, and manufacturing, have greatly improved since the recovery began.

In this series, we’ll look at Lockhart’s five key points regarding the U.S. monetary policy.

Continue to Part 2

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