Housing and general uncertainty continue to weigh down an economic recovery “still getting its legs,” the head of the Federal Reserve Bank of Atlanta said at conference on Thursday.
“The economy is gaining strength,” Dennis Lockhart, Atlanta Fed president and CEO said at the bank’s annual Banking Outlook Conference. But he cautioned that “the question of sustainability hangs in the air.”
Growth in the first quarter of the New Year is “a little lower” than in fourth quarter 2011, Lockhart said in a speech at a conference of bankers and regulators.
Though homes sales have lifted nationally, prices continue to fall. Metro Atlanta is among the hardest hit markets, with prices hitting a 14-year low in December, according to the closely-watched Standard & Poor’s Case-Shiller Home Price Indices.
Lockhart said “assuming no significant adverse shocks” that the U.S. economy should grow in the 2.5 percent to 3 percent range this year. But questions loom, including the outcome of debt negotiations in Europe and rising oil prices.
Lockhart said in weighing a policy that will help promote growth and improve employment, the benefits of sustaining the extraordinarily low Fed funds rate “outweigh the costs.”
After his speech, Lockhart told reporters that sustained gas prices above $4 historically have been cause for concern.
“Once you rise above that it bites the income and the discretionary spending of many families in the United States,” he said. Prices would have to be “materially” above $4 per gallon before he would re-evaluate growth projections. The average price is about $3.74 per gallon nationally and $3.68 in Georgia, according to AAA.
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