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Fed's Lockhart sets high bar for possible June rate hike

Dennis Lockhart of the Atlanta Fed takes part in a panel convened to speak about the health of the U.S. economy in New York November 18, 2015. REUTERS/Lucas Jackson

By Ann Saphir

CHICAGO (Reuters) - A top U.S. monetary policymaker on Thursday made it clear he would not support a rate hike this month and set a high bar for supporting any move even at the Federal Reserve's June meeting.

Slower-than-expected U.S. economic growth and inflation that is not yet clearly firming mean that caution and patience is "the right posture" for monetary policy, Atlanta Fed President Dennis Lockhart told reporters after speaking a CFA Institute symposium in Chicago.

Lockhart said that to support a June rate hike he would need to see economic growth rebounding fast enough to make 2 percent growth for the year a probable outcome, and continued monthly job gains of 200,000.

There should also be more evidence that inflation is firming, he said, and no deterioration in inflation expectations which for now are anchored near the Fed's 2 percent target.

"Certainly I think June should remain an option," he said.

Lockhart's explicit four-point wish list is unusual for a Fed official, and underscored concerns that Fed Chair Janet Yellen has also expressed about the staying power of a U.S. recovery in the face of global weakness.

Fed officials raised rates in December for the first time in nearly a decade, a move Lockhart supported, but have left them at a range of 0.25 percent to 0.5 percent ever since as they assess how a global slowdown might affect the U.S. economic outlook.

U.S. unemployment is at a healthy 5 percent, but growth in the first quarter appears to have slowed dramatically from the fourth quarter's 1.4 percent pace. The Atlanta Fed's estimate of first-quarter growth is 0.3 percent. And while inflation showed signs of healthy acceleration earlier in the year, a report earlier on Thursday showed prices rose less than expected in March.

"One reason I am let's say supportive of a patient and cautious posture is because I don't think the (Fed) is behind the curve particularly as it relates to inflation," Lockhart said.

The British vote on whether to exit the European Union just days after the Fed's June meeting "certainly has to be something that we have on our minds" Lockhart said, but "I don't think that question should completely stop the music for monetary policy setting the U.S."

Still, Lockhart told Bloomberg Radio earlier in the day, there is still time this year for two or even three rate hikes.

(Reporting by Ann Saphir; Editing by Meredith Mazzilli)