Home » Politics » Federal Reserve ‘took a lot of policy uncertainty out of the picture’: Dennis Lockhart
Federal Reserve ‘took a lot of policy uncertainty out of the picture’: Dennis Lockhart
Former Atlanta Fed President Lockhart on prospect for US recession
Former Atlanta Federal Reserve President and CEO Dennis Lockhart argues ‘there’s no reason to automatically assume a recession’ given that ‘the underlying fundamentals of the economy are strong.’
Former Atlanta Federal Reserve President and CEO Dennis Lockhart argued on Thursday that the central bank "took a lot of policy uncertainty out of the picture" after Fed Chairman Jerome Powell announced the Federal Open Market Committee voted to raise its key interest rate by 50-basis points.
"I think we now know what the policy outlook is for near-term, at least one or two more 50-basis point moves, probably two more 50-basis point moves and the balance sheet reduction, it will begin the first of June," Lockhart told "Mornings with Maria" on Thursday, the morning after Powell held a news conference following the Federal Reserve Board’s two-day meeting.
"So the markets and the public know pretty well what is going to happen in the near-term if the economy evolves more or less the way the Fed expects it to."
Powell alleviated some concerns of a looming economic recession after he rejected the possibility of an even larger interest rate hike than the one the U.S. central bank announced on Wednesday.
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Bond yields fell and stocks recorded their best day since 2020 after Powell helped to calm investors, who worried that the Fed's aggressive tightening of monetary policy in order to tame the hottest inflation in 40 years could tip the economy into a recession.
In remarks after the Federal Open Market Committee voted to raise its key interest rate by 50-basis points for the first time since 2000, Powell rebuffed any suggestion that a mega-sized, 75-basis point increase is on the table at future meetings. The S&P 500 rose 3% following his comments, the biggest jump since May 2020. The Dow Jones Industrial Average jumped 2.8%, or 932 points, while the Nasdaq Composite rose 3% as Powell signaled a "soft landing."
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"I think we have a good chance to have a soft or softish landing or outcome, if you will, I'll give a couple of reasons for that. One is households and businesses are in very strong financial shape," Powell said during the news conference on Wednesday.
"It’s a strong economy and nothing about it suggests that it’s close to or vulnerable to a recession," he added.
"Now, of course, given events around the world and fading fiscal policy effects and higher rates, you could see some slower economic activity."
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