Despite the revelation of some recent disappointing economic indicators, the call for a “serious discussion” about raising interest rates at the U.S. central bank’s meeting later this month was repeated by Federal Reserve Bank of Atlanta President Dennis Lockhart.

“Notwithstanding a few recent weak monthly reports — from the Institute for Supply Management, for example — I am satisfied at this point that conditions warrant that serious discussion,” Lockhart said Monday in Atlanta.

Between September 20 and 21, a meeting of the policy-setting Federal Open Market Committee would be held.

A possible division among the members over the need to raise interest rates has been pointed out at by recent comments from committee members. While Boston Fed President Eric Rosengren argued there was a reasonable case for gradual tightening, Fed Governor Daniel Tarullo on Friday repeated a cautious assessment of the economy.

To get some final clues before the central bank enters its traditional self-imposed quiet period before a meeting, investors will also listen closely to remarks at 1:15 p.m. New York time from Fed Governor, Lael Brainard. The governor has argued for patience in raising rates in recent comments.

He saw no urgency to act and preferred to see more upward movement in core inflation, said Minneapolis Fed chief Neel Kashkari, in an interview on CNBC Monday.

Since a hike in December that was the first increase in nearly a decade, the benchmark federal funds rate has been held in a target range of 0.25 percent to 0.5 percent. Fed officials are grappling with a mix of conflicting data as they approach their next meeting. The U.S. labor market has continued to add jobs at a healthy clip despite signs of continued weakness related overall economic growth.

“After relatively weak growth over the first half of the year, I expect a stronger second half,” Lockhart said to the National Association for Business Economics, citing the bank’s estimate. According to the Atlanta Fed’s tracking estimate, third-quarter growth was tracking at 3.3 percent on Friday.

Even though any progress in moving inflation toward the 2 percent goal may have stalled, Lockhart sounded optimistic and said that the economy is “making progress” toward full employment.

“The inflation data overall have not been suggesting disinflation or deflation, but the flat trend line is enough below target that, in my opinion, the shortfall cannot be considered immaterial,” he said. “I find this to be an awkward state of affairs.”

While and alternative scenario in which the economy is stuck in secular stagnation couldn’t be dismissed by Lockhart, he however said that his “base case” is for inflation to rise, and there is reason to be confident in the outlook.

(Adapted from Bloomberg)

Categories: Economy & Finance