JACKSONVILLE, Florida (Reuters) - Atlanta Federal Reserve Bank President Dennis Lockhart said on Thursday the U.S. economic recovery has started and made a plea for central bank independence to assure global markets the U.S. will pursue responsible monetary policies.
“Overall, the U.S. economy is improving but still fragile,” Lockhart told the World Affairs Council of Jacksonville. “Stabilization is proceeding, and the first stages of recovery are under way.”
The Atlanta Fed president said the Fed – the U.S. central bank – has been able to respond aggressively to the financial crisis without raising inflation expectations because it has a reputation for independence from political influence.
He said that information disclosure requirements for the Fed should not go so far as to open the monetary policy process to short-term political considerations.
“I welcome further discussion on ways the Fed can be more accountable and transparent but always within the context of maintaining ... monetary policy independence,” he said.
Congress is considering a measure that would expose Fed actions to greater scrutiny.
Lockhart, a voter on the Fed’s policy-setting panel this year, said over the medium term he sees a slow recovery as financial markets heal and the economy adjusts to businesses holding leaner inventories and to more frugal consumers.
“Often a deep recession is followed by a sharp rebound in business and overall economic activity,” he said. “At least beyond the third quarter, I do not foresee this trajectory.”
Rising defaults and falling property values in commercial real estate pose a risk to the outlook, Lockhart warned.
Inflation should remain contained for some time, he said.
Fed officials have been cautiously optimistic in recent comments that the recession, which began in December 2007, may have ended. However, officials consistently warn they expect only sluggish growth accompanied by high unemployment in the months ahead.
The central bank has said it will keep benchmark interest rates, which are near zero, at an exceptionally low level for a long time to support the recovery. Even so, the Fed moved at its August meeting to phase out one of its emergency programs.
The Fed’s next policy-setting meeting is September 22-23.