Fed's Lockhart bullish about U.S. economy, but visibility limited

|By:, SA News Editor

The Atlanta Fed's Dennis Lockhart expects the U.S. economy to start accelerating to an annual rate of 3% this quarter, although "it may not be clear for several months, or even quarters," whether GDP is on "a stronger and sustained growth path around a run rate of 3%."

Still, Lockhart believes that growth "will justify beginning the process of raising rates in the latter half of 2015," with the "normalization of interest rates to be gradual."

Lockhart, who was speaking in Dubai, also said that a test scheme involving reverse repos has been successful and "may very well have a role" in how the Fed tries to influence short-term interest rates. The program allows banks and financial firms to park cash with the Fed in exchange for an overnight loan of U.S. Treasurys. The central bank can manipulate the rates attached to the transactions.