Fed’s Lockhart Says Investor Don’t Focus on US and Overestimate China Shocks

Investors that have roiled global markets and thrown Federal Reserve policy off track should focus on the strength of the U.S. economy rather than the more remote risks of a global slowdown, Atlanta Federal Reserve bank president Dennis Lockhart said on Wednesday.

“Markets should first look at our characterization in the (Federal Open Market Committee) statements and in individual speeches of the economy really being on solid ground and performing well,” said Lockhart, who supported last week’s decision by the Fed to delay an interest rate hike but still says he expects to vote to raise rates some time this year.

His comments come a day before Fed Chair Janet Yellen delivers a high-profile speech on inflation, a topic that has divided policymakers who worry recent readings show a weakening economy from those who are confident inflation will rebound as the United States continues to grow.

The issue is central to the timing of a first rate hike because one of the Fed’s policy targets is a steady inflation rate of 2 percent, still substantially beyond recent levels. And its policy statement says explicitly rates should not be raised until there is confidence inflation will pick up.

Yellen will have to reconcile the Fed’s disparate views at a time of unusual uncertainty in global markets. China, a bedrock of global growth for much of this century, is in the throes of an unexpected slowing. Coupled with tepid growth in Europe, Japan and elsewhere, there is concern the United States could be dragged down as well.

Via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza