By Ben Klayman
DETROIT (Reuters) - The Federal Reserve should remain on track to raise interest rates later this year despite the U.S. economy's weak start to the year and a stock market sell-off this week, two Fed officials said on Thursday.
In separate events in Frankfurt and Detroit, St. Louis Fed President James Bullard and Atlanta Fed President Dennis Lockhart said U.S. monetary policy might need to be adjusted in light of the economy's steady improvement since the 2007-2009 financial crisis.
"Now may be a good time to begin normalizing U.S. monetary policy so that it is set appropriately for an improving economy over the next two years," Bullard said at a conference in the German financial hub.
The comments came amid a spate of weak U.S. economic data that prompted major analyst firms to scale down their growth this week. Fed policymakers also lowered their growth forecasts at last week's policy-setting meeting.
Investors have followed suit, sending shares on Wall Street down for four consecutive trading sessions.
The challenge now, Lockhart said, is to sort out whether recent weakness in exports, manufacturing and capital investment indicate the start of an economic slowdown or other temporary factors such as the soaring value of the U.S. dollar.
Lockhart said he is confident for now that the weakness is "transitory," and still regards it as highly likely that the Fed will raise rates at either its June, July or September meetings.
"We're still on a solid track ... The economy is throwing off some mixed signals at the moment and I think that is going to be passing or transitory," Lockhart said in an interview with CNBC from a Detroit investment conference.
The conflicting signals are partly familiar - seasonal softness that often accompanies severe winter weather - and partly uncharted. The Fed, for example, now finds itself moving in a divergent direction from other major global central banks, planning a rate hike at a time when Europe and Japan are still flooding markets with liquidity, and other central banks are cutting rates.
That has driven the value of the dollar steadily higher, and Lockhart said he, for one, was caught off guard by how much that currency move has apparently impacted U.S. exports and manufacturing.
At the same time, the rapid fall in oil prices has produced fallout that has been similarly difficult to analyze, as energy firms cut capital investment but consumers hold back on spending what they are saving at the gas pump, Lockhart said.
"In the beginning when the dollar declined I was prepared to, to some extent, dismiss the influence of the dollar as being not great because our economy is not so export-dependent, but I'm upgrading it as a factor to watch," he said.
(Additional reporting by Howard Schneider and Mike Flaherty in Washington, and John O'Donnell in Frankfurt; Writing by Howard Schneider; Editing by Chizu Nomiyama and Paul Simao)