Fed’s Lockhart says planned rate hike complicated by China

(Bloomberg) — Federal Reserve Bank of Atlanta President Dennis Lockhart said he continues to expect the first interest-rate hike in nearly a decade this year, while cautioning that a stronger dollar, a weaker Chinese yuan and falling oil prices complicate the outlook.

“I expect the normalization of monetary policy — that is, interest rates — to begin sometime this year,” Lockhart said Monday in Berkeley, California, without citing a particular month. “Currently, developments such as the appreciation of the dollar, the devaluation of the Chinese currency, and the further decline of oil prices are complicating factors in predicting the pace of growth.”

Lockhart declined to spell out if he favored moving in September or delaying liftoff. “I’m going to stick with later this year. We have three more meetings,” he told a Bloomberg reporter after delivering the speech. Lockhart said Aug. 10 that he thought liftoff was “close” and told reporters that “from my perspective September remains a live possibility.”

In addition to next month’s gathering, policy makers are scheduled to meet in October and December.

Lockhart, who votes this year on monetary policy, has consistently sided with the Federal Open Market Committee majority, led by Chair Janet Yellen. Investors have lowered the probability of a central bank rate increase in September amid continued financial market turmoil and slowing growth in China.

Lockhart said he continues to expect gradual improvement in consumer and investment spending and wages.

Multiple Headwinds

The U.S. economy has endured a “number of headwinds and shocks,” which have resulted in cautious behavior by consumers and businesses and led to a slow expansion, he said.