Fed’s Lockhart says rate liftoff case is ‘compelling’

“I think the economy is closing in on full employment,” which would suggest stronger wage gains, Lockhart said. “The trend in wage growth has been weak for some time, but it may be picking up.”

Inflation hasn’t met the Fed’s target of 2 percent, but that’s because of transitory factors including falling energy prices and a stronger U.S. dollar, Lockhart said. The Dallas Fed’s trimmed-mean measure of prices, which excludes outlying price changes, has gained 1.7 percent over the past year, Lockhart said.

“Comparing this and like calculations to headline numbers suggests to me that much of what’s suppressing inflation is transitory in nature,” he said. “I have bought into that view.”

One potential risk to his outlook was posed by the dollar, which Lockhart said had risen pretty substantially since mid-2014 and may have further to go as policies diverge between the U.S. and particularly Europe.

“With that divergence, it is possible a greater strength of the dollar is not priced in yet,” he told the audience during and a question and answer session following his speech. “I am treating a further rise in the dollar as a risk to my outlook and I wouldn’t rule it out as a possibility.”

Lockhart has never dissented from an FOMC decision. A former banker and Georgetown University professor, Lockhart has led the Atlanta Fed since 2007. The Atlanta Fed district includes Alabama, Florida, Georgia, and portions of Louisiana, Mississippi, and Tennessee.